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.