Sterling continues to lose, Euro too ends week at loss

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).

Sterling continued it loses from Thursday in Friday’s session against both the US dollar and the Euro. Causing cable to open $1.16145 but fall down to what remains a strong support level of $1.1605, proving there might be some support for sterling after it now appears interest rates may not be hiked as quickly as anticipated. The short reason for Sterling’s decline is largely due to Moody’s outlook, which highlights a continued downturn in UK growth. “Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the U.K.'s sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the UK's debt metrics to deteriorate to a point that would be inconsistent with a AAA rating,". This leaves the Bank of England in an awkward place and could see them sitting on the fence for some time to come. After the mixed reports this week with inflation at a 2 year high of 4.4%, we would expect rates to rise. However, MPC minutes and retails sales figures released on Wednesday suggested otherwise. So the questions will continue over the coming months of ‘will they won’t they’ raise rates, the outcome proving instrumental in how Sterling will perform in the markets.

The Euro fell against the USD and ended the week at a loss, trading late Friday afternoon at 1.4075. This came after Standard and Poor cut Portugal’s credit rating by two notches also the EU summit continues with no clear strategy emerging on how they will combat the debt fears of the peripheral nations. German IFO figures came out early in the trading morning but only slightly pushed the single currency against the greenback. Investors are now start talk about the collapse of the Euro as the debt crisis resurfaces.

The US made gains about both sterling and the Euro in the market after GDP figures rose by 0.3% to an annualised rate of 3.1%, however against the commodity linked currencies it was mostly lower as investors are looking for higher returns. This has pushed both the NZD and AUD up in the markets both moving 2 cents on Friday against sterling.

ECB members are being urged to look at Japans economic history by investors who suggest learning from the mistakes made in the 1990’s. Where higher interest rates were put in place to curb inflation. Some economists are now backing the doves of UK and EU central banks and suggest letting the markets settle themselves is the best approach.

Today is mostly focused around the US with Pending home sales expected out better at 0.7% compared to a previous -2.8% and personal consumption expenditure also improved at 0.6% compared to 0.2%, hopefully giving the dollar a boost and possibly pushing it below the key levels of $1.40 and $1.60 against the Euro and sterling respectively.

IN THE UK

• Sterling fell on Friday afternoon against the US dollar dropping below the key $1.60 mark over the weekend.
• Against the euro, the pound falls to lowest level since early November, spending most of the session below €1.14.
• Sterling’s decline comes after business confidence sits at a 2 year low and a possible ratings downgrade by Moody’s.
• The UK had a mixed bag of reports last week, which leaves the prospect of an interest rate rise still unknown. Market participants believe this week’s movements will be based on relative interest rates, especially as US head towards the end of QE2

ELSEWHERE

• Standard and Poor cut Portugal’s credit rating by two notches
• Euro fell against the US dollar and ended last week at a loss, trading late afternoon at $1.4075.
• US dollar makes gains as US economy grows slightly faster than expected, a rise of 0.3% to hit 3.1% on an annualised basis.
• Hawkish comments from Fed over the weekend help the US dollar during trading this morning.
• German Chancellor Merkel’s party lose control in Baden Württemberg but euro still remains well supported.

DATA TO LOOK OUT FOR

• US Pending home sales expected out better at 0.7% compared to a previous -2.8%
• Personal consumption expenditure also improved at 0.6% compared to 0.2%, possibly giving the dollar a boost
• Japanese retail trade expected at -0.5% compared to a previous 0.1%
  

Current Spot Rates (9.00am) 28th March 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.5982	1.1348	1.5518	1.5666	1.4685	10.20	10.97	130.592
USD		1.4106	0.9710	0.9802	0.9188	6.38	6.86	81.712

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 Pensions, QNUPS, HMRC QROPS 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.

Pound Slips to the Lowest- UK could have to borrow

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 pound slipped to its lowest in a week against the USD before today's report of retail sales, which came out at 1.3% compared to an expected 2.4%, which is considerably lower then the previous result of 5.1% in Jan, pushing cable to a low of $1.6129. In addition, Januarys' growth figure was revised down from 1.9% to 1.5%. On top of this Moody's the rating agency said the continuation of slow growth could be detrimental to the UK's AAA credit rating, as the nation would be forced to borrow money to boost a dwindling economy.

This comes after Sterling advanced to $1.6401, on Tuesday the strongest level since Jan. 19, 2010, on speculation the Bank of England would raise interest rates after inflation was revealed at 4.4%. The Euro declined against the dollar and the yen after Moody's Investors Service cut the ratings on 30 Spanish banks following a sovereign downgrade. However, the Euros' decline against the dollar was short-lived as Spanish bond yields were not raising as much as Portuguese bonds after the resignation of Prime Minister Jose Socrates, resulting in Fitch downgrading Portuguese credit rating to A- Whilst the Euro still trades strong for the time being pressure will mount as Ireland, Greece and Portugal in the coming weeks will be expecting large bailouts as announced in the EU economic summit yesterday. A bailout for Portugal may total as much as 70 billion euros said two European officials with direct knowledge of the matter. Also continuing fears for the Euro zone German Minster, Merkel praised Socrates tough austerity measures, suggesting Germany may be moving away from fully backing the Euro.

Across the Atlantic we saw fewer Americans file applications for unemployment benefits last week. Jobless claims declined by 5,000 to 382,000 in the week ended March 19. The number of people receiving benefits fell to the lowest level in almost three years. Giving the Greenback a small but much needed boost in the markets. The Dollar is still one of the worst performing currencies over the past 3 months and today failed to gain against the Euro as fears continue to grow over European debt worries.

In other news New Zealand's dollar rose to a three-week high against the greenback after the economy expanded in the fourth quarter, avoiding a second straight contraction with GDP figures rising by 0.2%. The Canadian dollar strengthened for the first time in three days as crude oil, the nation's biggest export, traded at almost the highest level in 29 months.

Finally the G7 currencies gave the go ahead to intervene with the Yen, suggesting that the Yen may replace the US dollar as the global funding currency and bring back the carry trading associated with the yen prior to the 2008 credit crunch.

In today's news all eyes will be on the US were GDP figures are expected to fall from 0.8% to 0.4% and consumer sentiment also expected to fall from 77.5 to 68.2. Putting the Dollar under continued pressure in the markets. In Germany, Europe's largest economy, Consumer confidence is expected out at 5.8% compared to a previous 6%. The EU economic summit continues and may provide more info on how the EU debt crisis will pan out.

IN THE UK

• Retail sales in UK fall to -0.8% in Feb, a fall from 1.5% the previous and below consensus, the pound drops to $1.6129.
• Budget reports growth forecast for 2011/12 revised down from 2.1% to 1.7% allowing the euro to gain on sterling to a low of €1.13511
• After downgraded growth forecast, ratings agency Moody's say the UK's AAA rating may come under pressure in the near term.

ELSEWHERE

• Moody's Investors Service cut the ratings on 30 Spanish banks seeing the euro drop in the market for a short period.
• Resignation of Prime Minister Jose Socrates, results in Fitch downgrading Portugal's credit rating to A-, Bailout on cards but reports suggest this might not be immediately and won't change the ECB's stance on raising interest rates.
• Euro shakes off earlier bad press, excitement about EU summit helps it push up to $1.42 and new 5 month high against pound.
• US data shows Jobless claims decline by 5,000 to 382,000, showing a slight improvement in the US labour market

DATA TO LOOK OUT FOR

• The EU summit continues and will undoubtedly give us more surprise in terms of the EU debt situation.
• GDP figures in US expected at 3.0% showing a slight rise from Q3, this would suggest the US economy is recovering well.
• US Reuters/Michigan Consumer Sentiment Index expected to drop 68.2

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 Pensions, QROPS Transfers, HMRC 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.

Pound Rises & Euro Also Rises Above $1.42 for The First Time

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).

Consumer prices rose 4.4% in February from a year earlier after a 4% increase in January, the Office for National Statistics said today in London. That’s the highest level since October 2008.

The pound rose for a fourth day in the longest stretch of advances since January after a government report showed U.K. inflation accelerated to the fastest pace in more than two years, adding pressure on the Bank of England to increase its benchmark interest rate.

“If we see a close above $1.64, the pound could come into its own a little bit and especially given that we’ve got MPC minutes tomorrow and we’ve got the U.K. budget, which can throw the pound around,” said an Investec spokesperson.

However, others have said that bearish members of the MPC will do little to change their minds following today’s data as they believe inflation is due to external factors that an interest rate hike will not change.

ECB Executive Board member Gertrude Tumpel-Gugerell and Governing Council member Yves Mersch both said yesterday that “strong vigilance” is necessary to keep a lid on inflation, a phrase the central bank uses to signal a rate increase is imminent.

The Euro rose above $1.42 for the first time since November and government bonds declined as investors increased bets on higher ECB borrowing costs. Yesterday afternoon however saw the shared currency erase gains against the greenback as investors speculated Ireland’s banks would have trouble repaying debt, sending Irish two year note yields to 10%.

The Euro fell 0.2% to $1.4193.

The Dollar Index, which tracks the U.S. currency against six major peers, touched a 15-month low as investors sought higher- yielding assets. With stock markets recovering after the Japanese tragedy, investors are looking for healthier yields as the markets begin to settle.

However, eyes must be kept on the Libyan crisis to see how things develop; with the dollar possibly gaining back loses if matters escalate.

Today all eyes will upon the UK as we wait for the Bank of England minutes and Budget report. If positive we can expect Sterling to maintain its momentum in the market and Cable will be looking towards the top of the trading range to 1.65285.

In the US we have new home sales expected worse at 5.6% compared to a previous 17.5%, showing that the US economy is still under pressure. European consumer confidence will be released at 1500 GMT with reports expected to come out slightly better at -11% compared to -11.2%.

Finally New Zealand GDP figures will come out at 2145.

IN THE UK

• CPI report show inflation rising to 4.4% in the UK, the highest since October 2008, Retail price index also rose to 1%,
• The pound rises to a high of $1.6403 against US dollar and continues to reverse loses against the euro, pushing to a high of €1.1549
• This morning, minutes from the last BoE policy meeting reveal a 6-3 vote on raising interest as per last meeting; sterling begins to fall as chances of a rise soon are pushed back.
  

ELSEWHERE

• Japan’s nuclear crisis mainly unchanged and still raises concerns as locals are advised to avoid food from area and reports suggest contaminated drinking water heading to Tokyo
• Knock-on effects of Japan’s earthquake have hit US as GM temporarily lay off staff due to lack of new parts coming from Japan
• EU members begin to signal that a European rate increase will be imminent but euro falls below $1.42 against US dollar
• USD falls against majors as markets begin to settle and investors seek higher yield investments, SGD, AUD and NZD see gains
• Middle East troubles continue as Yemen now at threat of civil war, risky assets may only be seeing temporary attraction.
• US Fed member Richard W Fisher says that no further QE is needed and Fed have to wind back stimulus to improve economy
• Euro zone debt concerns return to the headlines, Portugal may be forced to accept bailout if new austerity measures are not passed today

DATA TO LOOK OUT FOR

• Markets will be keen to see how George Osborne juggles a stale economy and huge deficit in the UK budget starting at 12.30pm
• US home sales expected at 5.6% compared to a previous 17.5%, showing the US housing market is still struggling.
• EU Consumer confidence expected to come out slightly stronger at -11%.
• Fed’s Ben Bernanke speaks today and may re-iterate Fisher’s comments

Current Spot Rates (9.00am) 23rd March 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.6345	1.1521	1.6177	1.6039	1.4695	10.29	11.27	131.953
USD		1.4182	0.9897	0.9813	0.8991	6.30	6.90	80.730

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS (Qualifying Recognised Overseas Pension Scheme), 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.

Interest Rates in UK Stable - Earthquake Causes Turmoil Elsewhere

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).

A very volatile close to the week last week began on Thursday when many traders cut long positions as the bank of England decided not to raise interest rates, although the Bank of England were widely expected to keep rates on hold, there was a small chance and some traders had been positioned for an early rate hike.

Looking ahead, the markets are now only pricing a 50% chance of a rate hike in May and although it had been priced in fully for June, before Thursday’s decision, this has now been pushed back and a hike is fully priced into the market for August.

This was followed on Friday morning by the earth quake in Japan. This terrible natural disaster has been reflected in the currency markets by investors moving away from higher risk currencies and seeking out safe haven currencies, this inevitably leads to sterling losing further ground.

The gains that the Euro had already seen against sterling were given an extra boost on Friday, driving it another 0.5% higher to 1.1568, following comments from Jean Claude Trichet that the ECB may push Euro zone interest rates up as soon as April.

The markets widely expect a break through 1.1560 to lead to a test of the next resistance level of 1.1531.

Against the US dollar sterling has also struggled, only a week ago sterling was testing a new one year high of 1.6344, however over the course of last week and due to all the factors that have also driven sterling down against the Euro sterling was driven down to a 3 week low of 1.5977 on Friday afternoon before recovering to close the day at around 1.6030 avoiding a close under 1.60.

Data on Friday showed that British factory gate inflation rose to its highest annual rate in more than two years in February, led by surging oil and food prices. However, a dip in core output price inflation, which excludes volatile factors such as oil and food, eased some concerns about rising inflationary pressures.

Also on Friday mortgage lending fell more than expected in January due to "an unusual combination of factors", according to new data from the Council of Mortgage Lenders (CML).

The number of loans for home purchases fell to 28,500, 29% lower than December. While the CML says a fall over the New Year period is usually expected, "a decrease of this magnitude is greater than seasonal factors alone would explain."

With a lot of uncertainty in the markets continuing and the situation and damage in Japan still not clear, don’t be surprised to see a week of volatility ahead in the currency markets

IN THE UK

• Markets believe a rise in UK interest rates has now be pushed back and are pricing in August as the earliest.
• Sterling hits 3 week low vs USD of $1.5977 but recovers to close above $1.60.
• Mortgage lending falls compounding misery in the UK housing market.

ELSEWHERE

• The disaster in Japan obviously dominates the international news, investors watch as Nikkei falls 6.8%
• Japanese yen struggles in wake of earthquake, with high volatility likely moving forward
• Bank of Japan leaves interest rates at 0.1% and due to meet this morning to discuss ways of keeping the economy stable.
• This includes a record 15 trillion yen, roughly $200bn pumped into the economy and asset buying could increase to 10 trillion yen
• Euro zone leaders decide to increase lending capacity of EFSF to its full €440bn.
• Irish stress tests show a €25bn discrepancy in Irish banks books
• Eyes are focused on Portugal, no bailout announced but many feel it’s just a matter of time.

DATA TO LOOK OUT FOR

• Very little in scheduled announcements but markets will follow decisions made in Japan to help the public/industries effected.
• Euro Zone Industrial Production released this morning is expected rise to 0.4% and could help the euro continue recent rally

Current Spot Rates (9.00am) 14th March 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.6090	1.1544	1.5941	1.5632	1.4955	10.21	11.05	131.763
USD		1.3935	0.9907	0.9715	0.9295	6.35	6.87	81.891

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.