QROPS update 8th July 2011 Pension income drawdown Foreign exchange QROPS and QNUPS

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).

The market was dominated Thursday by interest rate decisions from both the UK and the Eurozone.

The UK released their Manufacturing Production month on month at 9.30am, of which beat

expectation posting figures of 1.8% against an expected figure of 1.1%, giving Sterling some early

strength and allowed it move higher and test the €1.1200 levels ahead of the interest rate meetings.

The first interest rate decision meeting to take centre stage was the UK at 12.00pm, as expected the

MPC decided to keep interest rates on record lows at 0.5% and contrary to MPC comments earlier in

the week no further expansion to our quantitative easing package was taken also. This kept Sterling

fairly muted and the market remained trading in a fairly straight line ahead of the ECB rate decision.

The ECB rate decision took place at 12.30pm, where they raised their interest rates by a further 0.25%

to 1.50%; this created some volatility allowing GBP/EUR to peak at highs of €1.1227 before falling to

lows of €1.1115 later on in the trading session. EUR/USD was trading at lows of €1.4219 before

trading higher to €1.4374 after the interest rate decision meeting.

Across the pond was fairly quiet on the data front with only two pieces of high impact data being

released.

Firstly their ADP Non-Farm Employment Change of which posted a figure of 157k against an expected

figure of 67k. This figure is used as a barometer for today’s Non-Farm payroll figure, traders usually

look at the ADP report to gauge whether today’s data will fall in-line, however no real correlation

between the two figures is apparent.

Unemployment claims was also released at 1.30pm of which fell roughly in-line with expectations

posting a figure of 418k against a figure of 421k. Although it's generally viewed as a lagging indicator,

the number of unemployed people is an important signal of overall economic health because

consumer spending is highly correlated with labour-market conditions

Today’s main data to look out for is the UK’s PPI input month on month data of which is expected to

post a figure of 0.1%. The reason why this data is important is because it’s a leading indicator of

consumer inflation - when manufacturers pay more for goods the higher costs are usually passed on

to the consumer, of which will then directly correlate to our monthly inflation figure.

Also we have the Non-Farm Payroll figures being released at 1.30pm of which is expected to post a

figure of 88k, against a previous months figure of 54k, alongside this we also have the

Unemployment rate of which is expected to fall in-line with Junes reading of 9.1%.

IN THE UK

• UK Manufacturing production beats expectations posting a figure of 1.8% against a figure of 1.1% after a sharp fall in April
• Industrial Production figures fell short of expectations but still remained positive, sterling traded upwards throughout the course of morning.
• At 12.00pm the Bank of England chose to keep UK interest rates on record lows at 0.5% with no additional funding for the QE programme leaving it at £200bn, the minutes are released on the 20^th July. Voting patterns this time perhaps will be more important because there has been speak of QE again and markets will be interested to see if anyone has joined Adam Posen in the ‘extra QE’ camp.
• This morning at 9.30am UK Producer Price Index figures have all posted healthy figures, so far this has had little effect on pound strength.

ELSEWHERE

• As expected the ECB raise interest rates by a further 0.25% to 1.5%, the speech afterwards had slightly dovish undertones regarding growth which helped the pound hit a high of €1.1229 before steadily falling as the Trichet then mentioned that there will more rate rises.  
• Trichet suspends minimum rating requirement for Portugal
• EUR/USD hits highs of €1.4374 after the interest rate meeting takes place.
• US ADP Employment change beats expectations of 67k forecasted by posting 157k, the ADP figure is not as useful as NFP released this afternoon but has provided some expectations on a good figure today
• US Unemployment Claims posts figure of 418k against 421k staying fairly in-line.
• Swedish Riksbank raise interest rates to 2.0% further alienating the UK as one of the only European nations to leave rates on hold
• CAD Ivey PMI beats expectation of 65.7 by posting a 68.2

DATA TO LOOK OUT FOR

• Key data this afternoon is US Non-Farm Payrolls at 1.30pm the figure is expected to rise by 90k against previous months 54k, a higher than expected figure posts a more favourable outlook for the US economy and could help the US dollar.
• US Unemployment Rate expected at 9.1% in-line with last month’s reading.
• At 12.00pm Canadian Unemployment Rate expected at 7.4% on par with last month whilst Net Change in Employment is expected to fall to 11.3k form 22.3k last month.

Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

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