Euro begins to weaken- market blames poor weather conditions

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 day started off with Euro around €1.1730 and US dollar around $1.6270, but by the end of the trading day things had changed and reversed previous movements, particularly on the dollar which dropped back below the $1.62 mark.

The ECB kept key interest rates on hold at 1% for February, and the Euro began to weaken as December’s retail figures showed a decline of 0.6%, the figure was expected to come out at +0.5%. The market is blaming poor weather conditions in the lead up to Christmas for this fall.

Jean Claude Trichet’s speech continued to weaken the Euro, pushing it over €1.18 as he stated inflation risks are “broadly balanced”. He continued to say rates “still remain appropriate” but that “very close monitoring is warranted”.

Andrew Sentence, who leaves his post in May 2011, hinted that we might see a move in interest rates in the UK by 25 – 50 bases to keep rates in line with the high inflation we are currently experiencing, boosting the pound to a 3 month high against the dollar.

UK services PMI was released at 9.30am. The figure came out at 54.50, beating expectations of 54.0 and was greatest climb in 8 months. UK construction also expanded in January, as the weather improved. Building activity rose to 53.7 from

49.1 in December, beating the forecasted figure of 49.5. The reading was the highest since September 2010, confirming the 10th out of the last 11 expansions. CIPS commented that not only did better weather conditions help boost construction but also gains in new business.

In the afternoon the dollar rallied across the board as US ISM non-manufacturing report printed at 59.4 versus 57.20 as expected. Over the course of the day the dollar gained over 100 points against the Euro, and also the Great British Pound, making up for its losses early on in the week.

With little date due for release today, the market will be focusing on the non-farm payroll figure for January. We are expecting a figure of 145,000 proving that the US hiring market is picking up steam.

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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