QROPS Update 9th May 2011 Pension Foreign Exchange Report QROPS & QNUPS

We continue our daily look at factors affecting currencies allowing some insight into market conditions affecting exchange rates. Cash and income timing for UK Pensions and QROPS should be considered to maximise the Pension, QROPS and investment income and benefits taken.  

Investment market volatility and currency exchange remains a challenge. Things are still very volatile and we are in unique global influencing territory.  In conjunction with investment returns, currency exchange continues to concern many expats with UK Pensions, QROPS and now QNUPS.

Sterling recovered from its recent poor run of form on Friday, bouncing back following poor

PPI data that could indicate that the Bank of England may be forced to raise interest rates

sooner than expected.

UK PPI (producer price inflation) did not fall as much as the market had forecast, dropping

5.3% in April from 5.6% in March and increasing the risk that consumer inflation will not fall

as much as policymakers hope.

Most in the market still expect the UK to remain significantly behind the Eurozone with their

monetary tightening policy and this leaves the Euro well supported around the €1.14 level.

The UK interest rate hike which was, as recently as a few weeks ago, priced in for August has

now been pushed back by the market to December at the earliest following the raft of poor

data recently which has again highlighted the fragility of the UK economic recovery.

Speaking on Friday Mervyn King suggested that the European policy makers and central

banks should look more carefully at the banking system when deciding monetary policy,

possibly suggesting that he thinks the ECB have jumped the gun with their monetary

tightening policy. He added that he believes that inflationary pressures in the UK economy

are only temporary.

In the US employment is top of the agenda, not just from an economic stance but also a

political one. We saw the much anticipated data start with Non-farm payroll increasing again

to 244,000 meaning that the gains from the previous two months was revised up by 46,000

workers. However, despite this positive reading the unemployment rate worsened to 9.0%

from 8.8% last month. It had been forecast to remain at last month’s level.

The US dollar has been retracing some of the considerable gains posted by sterling and the

Euro over the last few weeks and this was highlighted again following a news report in the

German media suggesting that Greece had seriously considered leaving the Euro.

Germany's “Der Spiegel” magazine said euro zone finance ministers were meeting in

Luxembourg Friday to discuss Greece's possible exit from the single currency. German and

Greek officials were quick to deny the claims but market sentiment remained bruised.

The euro hit a low of $1.4350 and counted weekly losses of 3.2% against the dollar, its worst

week against the US currency since the start of 2011. The euro fell almost 2% Thursday after

the ECB President Jean-Claude Trichet indicated that a rate hike next month was unlikely.

The Euro also lost ground against sterling finishing last week down 0.3% at €1.1305, despite

this the market still sees the Euro as a good buy while the ECB continues to tighten its

monetary policy.

IN THE UK

• Poor PPI data indicates that the UK may have to raise interest rates sooner rather than later leading to sterling strength.
• Mervyn King, speaking on Friday reiterates that he believes inflationary pressures in the UK are only temporary.
• Sterling retraces Euro gains driving the Euro briefly back over €1.14.
• UK banking sector releases figures Friday with large profits across the board giving the UK economy a boost.
• UK Chancellor says UK will not be involved in any additional bailout for Greece if needed, was reluctant to help in Portugal bailout.
• CBI cuts economic forecast for Britain to just 0.1% for both 2011 and 2012

ELSEWHERE

• Euro loses ground against the US dollar following report that Greece is going to opt out of the Euro, falling to $1.4310
• Greece finance minister ask the international community to ‘leave them alone’ as the reports are not helping them in their recovery.
• US Non-farm payroll improves however unemployment rate is up from 9.0% from 8.8%.
• Canadian employment data is slightly better than expected.
• BBC report that interest rate on Irish bailout loan to be reduced

DATA TO LOOK OUT FOR

• Quiet day for data today, no UK, EU, or US data released.
• Canadian housing starts released at 1.15pm
• UK RICS House Prices are published at midnight tonight, may affect tomorrow’s rates after disappointing Nationwide data last week.

 Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pensions, investments, currency exchange and guidance on taxation in most popular ‘sunnier’ climates.   This with the re-assurance and security of UK authorised and regulated advice – essential tools for your security.