Market Dynamics - A Glance

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 or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension, 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, QROPS and now QNUPS (Qualifying non UK Pension schemes).

A quiet day on the UK front yesterday, as no British data was due for release, so all eyes were on U.S September producer prices, August international trade figures and the latest weekly jobless claims numbers to provide some macroeconomic direction yesterday afternoon.

However, we did see Sterling hit an 8-month high versus a broadly weaker dollar as it came to light that Singapore was to widen the trading band for the Singapore dollar. Sterling rose around 1.4% to a high of $1.6066 once it broke above the $1.60 level. The US unit has increasingly come under pressure since the Federal Reserve announced a fresh infusion of cash into the economy.

The FTSE 100 index also opened as much as 0.3% yesterday, tracking gains overnight on Wall Street and in Asia after solid earnings news and hopes for further quantitative easing.

Singapore said it would maintain a modest and gradual appreciation of its currency. The Monetary Authority of Singapore sets policy by managing the Singapore dollar in a secret trade-weighted band against a basket of currencies, instead of setting interest rates.

The Australian dollar, with its high yield and the economy’s link to commodities, led the gains yesterday as many traders saw a rise to parity with the U.S dollar as just a matter of time. The AUD gained more than 0.6 % to reach $0.9972, its highest in 28 years.

“The Aussie rally is being driven by strength in the Australian economy together with a supply and a general depreciation of US dollars. There are barriers at parity, but it’s difficult to see the trend changing”, said a currency strategist at Westpac in London.

The US dollar also fell against the euro at $1.4122, its lowest in more than eight months, 0.3 % against the Japanese yen, edging towards a 15-year low of 81.37 and 0.8 % against the Singapore dollar, to $1.2896.

There’s still may be some respite in the US dollar, however, as a growing number of market players are saying that the financial markets have already priced in further quantitative easing early next month by the Federal Reserve and the dollar’s decline may soon come to a halt.

We also saw the US Federal Reserve’s expectations of further easing boosted by a rise in jobless claims, also keeping pressure on Democrats poised to lose congressional seats in November 2 polls. Initial claims for state unemployment benefits rose to a higher than expected 462k in the latest week, according to the Labor Department. Expectations were at 445k. Producer prices, however, rose 0.4 % in September and the core index, which excludes volatile food and energy prices, rose 0.1 % in the month. The US trade deficit for August jumped 8.8 % to a larger than expected $46.4 billion, pushed by record imports from China , helping the US deficit with Beijing set a new record of $28.0 billion, the Commerce Department said. This will likely weigh on economic growth going forward.

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 Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

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