Sterling Falls, Pound Declines by 1.6%

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 plummeted yesterday, as UK GDP data blew away talks of interest-rate rises by the Bank of England in the short-term future. Although the currency has performed strongly so far this year, the pound plunged to $1.5752 charting a hefty 1.6% decline from its higher point of the day, and following figures showing that the UK Economy in the last three months of 2010 had shrunk by 0.5%. This was in opposition to the expected growth of 0.5% and in comparison to the rise of 0.7% in the previous quarter.

While output in the UK was affected by seasonal factors during the fourth quarter, analysts stated that this is once again an example that developed economies continue to struggle with recovery from the financial crisis and global economic slowdown.

Mixed views on sterling’s outlook circulate the markets as sterling’s rally since mid- December appears to be over. The figures are bad news for the government which are due to implement public spending cuts in early 2011. “Whilst yesterday’s GDP figures are backward-looking, they are nevertheless crucial to understanding the resilience of the economy to shocks. It seems that the economy is incredibly vulnerable and with the fiscal tightening yet to fully bite, we will have to brace ourselves for a bumpy ride,” said economist at Daiwa Capital Markets, Europe.

This, however, presents a dilemma for the Bank of England, which now has to juggle a worrying outlook for growth combined with elevated price pressures.

There were positive signs from Europe, however, as the debut bond from the European Financial Stability Facility attracted strong demand from investors.

Demand for the bond is evidence that concerns about the fiscal and debt troubles dragging some EU member countries finally appear to be easing.

The euro strengthened to trade below €1.1625 for the first time in three weeks, hitting a low of €1.1575. Meanwhile, the euro retraced its recent gains against the Dollar as traders positioned themselves ahead of the key data releases. Markets are also on alert for the Federal Reserve interest rate policy decision due to be released today and traders will be watching for whether the Fed’s language reveals a willingness to implement changes or curtail its controversial $600 billion monetary-stimulus plan.

Although the Dollar traded higher against some Currencies, namely GBP, Euro and

AUD, its weakness against the Japanese Yen, NZD and Swiss Franc indicates that it was not the dollar dictating the flows in the foreign exchange market yesterday.

Whilst US economic data is important, it appears that the thematic trades in Europe and Asia have a significant effect on monetary policy and that the strength of US economic reports may not be enough to motivate the Federal Reserve to reduce Quantitative Easing. However the Fed, within the next couple of months, will need to decide if the asset purchase program needs to be extended beyond June.

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.

QROPS

Sterling firmed against dollar- Retail sales Very Disappointed

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 Qualifying Recognised Overseas Pension Scheme (QROPS) 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).

Sterling firmed against the dollar on Friday, shrugging off poor UK retail sales data as it tracked gains in the euro against the U.S. currency and remained supported by expectations for higher UK interest rates.

Official data showed retail sales fell 0.8% during December, much more sharply than the 0.3% fall forecast in a Reuters poll.

The data highlighted the fragility of the UK economic recovery, just as the government's harsh austerity measures take effect. It had been expected, however, that December's cold weather would hit retail sales, and this dimmed the negative impact on sterling, analysts said.

Traders also said an earlier euro/sterling sell order by a European bank helped temper the pound's losses.

"We have seen sterling adopt a more bid tone of late, primarily due to inflation news and rate hike expectations. Retail sales disappointed massively but they were expected to be bad and can be erratic," said ETX Capital.

"We have settled in to a $1.5850 to $1.6050 range and although there are some whippy moves intraday there is still the underlying bull trend that has been in play since the start of the year, when we were at levels around $1.5400".

Comments from Bank of England policymaker Adam Posen, who said he had not changed his view that spare capacity in the UK would push inflation back below the 2% target, caused the pound to briefly pare gains.

However, Posen -- a known dove on the Monetary Policy Committee who has called for more easing measures -- also conceded in an interview with Bloomberg News he saw risks of inflation from sterling weakness versus the euro.

Sterling was up 0.6% at $1.5998, well above a low of $1.5867 after the retail sales data and helped as the euro rose to a two-month high against the U.S. currency.

The pound hit an eight-week high of $1.6060 earlier this week. Beyond that its next target is the Nov. 16 high of $1.6095, followed by the Nov. 4 high of $1.6300.

The pound dipped against the euro by 0.5% to €1.1723, its weakest since Jan 5th supported by breaks above its 55- and 200-day moving averages in the €1.1815 region.

The euro gained broadly on improving confidence that euro zone countries will receive comprehensive assistance to deal with their debt problems, though it stayed below resistance at its 100-day moving average at around 85.35 pence.

RATE EXPECTATIONS

The pound has been well supported since higher-than-forecast UK inflation data on Tuesday caused investors to bring forward expectations for when the Bank of England will hike rates.

UK interest rate futures have a 25 basis point rise fully priced in by July and a significant risk of a hike as early as May. However, market watchers are wary that a weak economy and harsh austerity measures to come mean a rate hike is not a done deal and some analysts warn sterling's gains may be overdone.

"If we get another negative (retail sales) number, there will be no question that the Bank of England won't tighten in the first quarter this year," said currency strategist at Credit Agricole.

They added that recent strength in the pound due to increased speculation about a Bank of England tightening was not justified, and that he expected the pound to correct lower in the next 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 Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

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Sterling Gains after Rise in CPI Due to Oil Prices

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's gains against the dollar were extended yesterday after Consumer Price Inflation rose to an 8 month high of 3.7%. The increase in CPI was driven by rising oil prices and saw a strong increase on the consensus figure of 3.3%, and biggest ever monthly gain. This increased speculation that interest rates may need to rise soon, possibly in the first half of this year.
"I think it does raise the risk that the Bank of England will have to move interest rates in the first half of this year. We don't think they'll move next month because the data has actually been a little bit weaker during the start of this year," said a UK economist at Deutsche Bank.
Sterling rose around 90 pips immediately after the data to $1.6060 its highest since 22nd November.
Against the euro, Sterling made gains from €1.1901 to €1.1973 after the CPI data, however sterling did not sustain its gains falling to as low as €1.1891 in the afternoon.

The main focus will now be on the Bank of England minutes out next week. Traders will be eager to see if yesterday's CPI figures have encouraged any other Bank of England policymakers to join Andrew Sentance's hawkish views to increase interest rates, something he has stood by since June 2010.
In other data British consumer confidence rose in December for the first time since August, although worries about jobs and the economic outlook still left it well below its long-term average.
The Nationwide Consumer Confidence index climbed eight points to 53 last month, ending three months of falls and matching October's figure.
The Royal Institution of Chartered Surveyors' seasonally adjusted house price balance nudged up to -39 from -44 in November, improving more than the consensus forecast of -42.
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.

QROPS

Sterling up against US dollar and Euro

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 started the week on the front foot making gains against the US dollar and the euro off the back of rumours that higher inflations data (released today) could trigger the Bank of England to raise interest rates in the first half of this year.

Sterling was further buoyed against the euro after the single currency’s recent rally ran out of steam as investors remained unconvinced that enough progress was being made to improve the euro zone debt problems.

At 5.00pm yesterday sterling was up 0.2% on the day against the US dollar at $1.5909 having risen to a high of $1.5955 its highest since the end of November.

Against the euro sterling was also doing very well, up nearly 1% on the day trading at €1.1964 having risen as high as €1.1976 earlier in the day.

Markets are awaiting the UK CPI data released at 9.30am today; this reading is expected to give more evidence of high inflation.

Markets are expecting a 3.3% reading year on year for December. A figure like this would put pressure on the Bank of England to discuss raising rates in a move that would be designed to curb this increase in inflation despite some calling for a the Bank of England to keep rates on hold.

Ernst & Young ITEM Club predicts that the consumer price index, the government's preferred measure of inflation, will peak at nearly 4% in February causing the Bank of England to increase interest rates from the current level of 0.5%.

"A premature rate rise would boost the pound, weakening the UK's ability to increase its exports, which we have long maintained hold the key to the UK's economic recovery," said ITEM's chief economic advisor.

The rumours of higher inflation have already driven sterling up over the past few trading days, however there may still be some sterling strength to come.

The euro zone is a very similar situation with Jean Claude Trichet’s comments about keeping a close eye on inflationary pressures on Thursday sparking market talk about a possible rate hike in the euro zone, and took the euro sharply higher against the dollar.

With the rate hike in the UK seen by markets as likely to happen sooner than in the

Euro-zone expects the volatility to continue in the short term.

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.

QROPS

Sterling Figure Rises High, Euro Still Struggling

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 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).

Sterling hovered close to a four-month high versus a struggling euro on Tuesday as sovereign funding worries plagued the single currency and the increasing prospect of higher interest rates in the UK supported the pound.

The euro remained on the back foot with the focus on whether Portugal will be able to raise funds in the debt market on today or be forced to turn to the European Union and IMF for financial aid. Bond auctions in Spain and Italy will also be closely scrutinised this week.

Sterling traded around €1.2047 in afternoon dealing after holding within a tight range throughout the day, but it was not far off a four-month high of €1.2070 hit on Monday when the euro came under broad selling pressure.

"It's primarily euro weakness that's been driving EUR/GBP but there's also some emphasis shifting to whether the UK will have to raise rates soon," said currency analyst at nabCapital. "But any hike that comes this year to re-establish the Bank of England's credibility on inflation shouldn't be a long-term positive for sterling".

Industry groups fear that louder cries about the Bank of England’s credibility could drive it to tighten policy before a fragile economic recovery warrants it, particularly with harsh government spending cuts about to bite.

"Public policy tensions over rising inflation pressures and a necessary Bank of England policy response are lifting sterling. We see further sterling upside as this driver gains greater traction this week." said Credit Agricole CIB analysts in a note to clients.

The Bank of England is expected to keep rates unchanged at this week's policy meeting, but Citi recently changed its call to expect two rate rises this year, with Societe General bringing their expectation for a first rate hike forward to August.

Technicals were showing further room on the downside for the euro, with Commerzbank analysts highlighting potential for a move to the June 2010 low at €1.2396 against the pound.

Sterling sat tight against the dollar to $1.5555, towards the top end of a $1.5345/1.5680 range set from the end of December.

Traders said demand from Asian and Latin-American sovereign accounts helped to underpin the pound on the day, together with leveraged buying. Stop-loss orders were reportedly lurking at $1.5610.

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.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

Sterling and Pound Fall against Dollar- Inflation Still on Rise

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 Qualifying Recognised Overseas Pension Schemes (QROPS) 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).

Sterling dropped against the US dollar yesterday but made gains against a broadly weaker euro.

Early on in the session, UK mortgage lender Halifax released a report that showed UK house prices fell 1.6% year-on-year in the three months to December, the biggest fall since November 2009. With the housing market still an important part of the UK economy and underperforming again, the pound fell against the dollar immediately after the announcement to a low of $1.5479.

Against the euro, the pound fell off a 4 month high of €1.2062 set during Asian trading early in the morning to fall back below the €1.20 mark. However as sovereign debt problems in the euro zone intensified, the pound managed to finish the London session at €1.2045.

Over the weekend, reports have said that both France and Germany want Portugal to accept financial help from the EU and IMF to help stop their debt problems rubbing off other euro zone periphery nations.

The euro is likely to remain under selling pressure as long as concerns are there that debt problems will extend beyond Portugal. Spain is now another country that investors believe may have to seek aid, while their borrowing costs escalate.

In the UK inflationary pressures have led many experts to suggest that the UK may have no choice but to raise interest rates before wanting to do so. Prime Minister David Cameron spoke on Sunday about his concerns about the higher than ideal prices. Inflation is now almost double the Bank of England’s target rate of 2.0% and still rising.

Historically the best way to lower inflation is to raise interest rates. The UK is in a difficult position, although rates are at an all-time low of 0.5% the economy is still fragile and an increase in interest rates could halt the recovery and send us back in to recession as business and private individual struggle with higher repayments.

The pound would though benefit from a rise in interest rates and pound investors would see better yields on their investments with potentially more to come. Some traders have mentioned that sterling will gain support amidst the speculation.

In reality though, the Bank of England release their decision on interest rates on Thursday and expectations are very much for rates to remain on hold at 0.5% and possibly stay that way until the 4th quarter of the year.

Technical analysts have said with the pound rising past the €1.2050 mark and both the euro zone and UK finding themselves in the positions they are, the pound could test the highs hit last year in June of just under €1.24. Significant resistance would be found here as this represents the highest level the pound has hit since the spectacular decline in 2008.

Sterling's gain versus the euro helped to push the UK currency's trade-weighted index to 81.40, its highest since mid-December.

Some traders said that while sterling was likely to continue climbing against the euro, it could lose out to a broadly stronger dollar.

The Euro dropped to a low of $1.2877 against the dollar and has seen a similar decline to that against the pound, having been over $1.34 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 Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.