Recent gains of Sterling falters- Prices unexpectedly rise by 0.8%

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 recent run of gains faltered in Friday trading as investors became cautious ahead the pending US jobs data which was released at 1:30pm.

The UK released positive housing data which showed house prices unexpectedly rose 0.8% in January which was well above market expectations for a flat reading. This data helps to ease some concerns over the housing sector but it still remains fragile after figures last week showed a large drop in mortgage approvals which is the main indicator for the market.

Sterling was given a helping hand last week as hawkish comments from the Bank of England kept adding fuel to the expectations the UK interest rates will rise from the current record low of 0.5%. The next Bank of England policy announcement is due on Thursday and this will be followed with the Bank’s quarterly inflation report due later in the month which may give more indication as to when a rate increase may occur.

"Sterling is highly sensitive to interest rate expectations and any strong data or hawkish Bank of England comments will push it higher," said an economist at AIB Group Treasury in Dublin.

Elsewhere the US released Nonfarm payrolls which came in lot lower then expected, payrolls grew by a disappointing 36,000 in January which was a lot lower then the predicted figure of 145,000, the unemployment rate in the US now stands at 9% down from 9.4% in December. This meant investors retreated and returned to the safe haven of the dollar and less riskier assets.

Some market participants also cited the dollar’s rally was due to US 10 year treasury yield as a catalyst to drive demand in the dollar.

The pound moved away from the 3 month high of $1.6279 against the dollar which was achieved on Thursday. Sterling traded between $1.6170, the days high to end the day’s trading near the low of $1.6038.

The euro came under broad selling pressure on Thursday after the European

Central Bank President dampened expectations the euro zone will be next to look to a hike in interest rates. This allowed sterling to trade above the €1.18

level through-out the day and it reached a day’s high of €1.1868.

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 QROPS advice – essential tools for your security.

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