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).
After Tuesdays better than expected PMI for manufacturing proved to be a sight for sore eyes, yesterday’s Purchasing Managing Index for measuring the activity of the construction sector, also showed a return to growth in the month of January, generally helped by the bad weather and a rise in new business.
A great start to the year, to say the least, suggesting the UK economy is rebounding from its initial shock 0.5% fall at the end of 2010.
Sterling hit a high of three months against the US dollar after the data came out, raising the likelihood of interest rate hikes which the Bank of England may be forced into, especially if commodity prices continue to climb and inflation becomes embedded.
Deputy Governor Charles Bean was noted saying, however, that he expects inflation
to fall back towards the target 2% level, providing there are no further price shocks.
The UK’s has had its record low 0.5% level for almost two years, but inflation has been above its target of 2% for much of the last three years and is likely to rise further.
Andrew Sentance was joined in his call for a hike in interest rates last month, by colleague Martin Weale. Sentance, in an interview with CityAM, said that the longer the Bank of England delayed their battle against rising inflation, the bigger the threat to its credibility. Policymakers, he said, should look through the fourth quarter GDP figures as recoveries are never smooth.
Moving onto the euro, we saw it slip yesterday after on-going uncertainty about how to solve the region’s debt problems, highlighted by a lack of consensus about a euro zone rescue.
The euro pulled back from its three month high against the dollar in earlier trade, after comments from a German source said that Berlin opposed the EFSF rescue fund buying bonds from euro zone countries.
Standard and Poor’s rating downgrade of Irish government debt, underlined fundamental weakness in some euro zone countries, giving the urge to short-term speculators to sell the single currency.
“The euro is selling off further on this”, said a trader in London, referring to Germany’s resistance to the bond buying.
The losses against the euro were limited, amidst rising expectations that the European
Central Bank will be well ahead of its US counterpart in hiking rates.
Jean Claude-Trichet, president of the ECB, will be speaking later today at a news conference, to give warnings on inflation, after data earlier this week reflected inflation was higher than forecast.
While the dollar had recovered from a 12-week low against a currency basket in early trades, it still remained very sluggish after solid manufacturing data this week, low
US yields and stimulative US monetary policy pushed investors towards the riskier assets.
The US Private sector report boosted this move also, after showing private sector jobs added more jobs than expected in January.
But, unlike in 2004, when the Federal Reserve started pushing up interest rates, the
US central bank is still committed to a stimulative policy and a Fed official said another round of bond purchases could be on the agenda at the next Fed policy meeting in mid-March.
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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