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).
The currency markets were much quieter than usual on Monday as the US celebrated Columbus Day. With a lack of US data coming through and trading fairly thin on the ground, volatility was much lower than we have seen over recent weeks with sentiment being the main contributor to currency movements.
This being the case the pound remained under pressure again as Chancellor of the Exchequer George Osborne said in a statement he would go along with whatever the Bank of England decided was the best course of action regarding quantitative easing.
Speculation has been running over the last three weeks about whether the BoE would start the monetary stimulus over again and extend the current level of £200bn. The pound has dropped from just under €1.22 to around the €1.14 mark against the euro as investors drop their pound positions ahead of any potential stimulus.
However, that speculation around QE may quieten down later today as at 9.30am the Office of National Statistics release the Consumer Price Index for the last year up to September, a key measure of inflation. The consensus is for the figure released to be in the region of 3.1%, irritatingly high for the Bank of England and this may be the catalyst for more of the 9 members of the Monetary Policy Committee to start to side with Andrew Sentance’s view that interest rates need to start to go up, and leave QE on hold for now.
Data from the Commodity Futures Trading Commission showed currency speculators reversed bets against sterling and were now positioned for the currency's advance.
Ahead of today’s CPI figures the pound, although still under pressure, fell only slightly yesterday as investors wait to see what happens. At 3.00pm the pound was down 0.3% against the dollar at $1.5908, above last week’s lows of $1.5820 but below the physiological barrier of $1.60. Some analysts said that the pound’s inability to stay above €1.60 has caused profit taking ahead of the CPI figures.
The dollar itself has been losing value as the BoE’s US counterpart the Fed have also indicated they may also bring forward another bout of QE. The US has been facing difficulties over the recent months as key figures such as GDP, employment data and production figures have all disappointed. However unlike the UK, they appear to lack the split on opinions with many experts saying their QE could start next month
The dollar did pare some losses after sources said China raised reserve requirements by 50 basis points for six large commercial banks, which dented risk appetite and prompted safe haven demand for the dollar once more. This forced EURUSD down to 1.3855, a percent lower than last week’s high of 1.4027
Exchange rates dominated the annual meeting of the International Monetary Fund in Washington amid concern that nations are relying on cheaper currencies to aid growth, risking trade wars. China was accused of undervaluing the yuan, while low interest rates in the US and other rich nations were blamed for flooding emerging markets with capital.
Finance ministers and central bankers pledged to improve cooperation, yet did little to show how they would alter their ways beyond agreeing to let the IMF to study the matter.
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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