Greek Debt Restructuring Inevitable, Markets Considering Meeting Minutes

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).

Yesterday was very flat for UK data. The Eurozone economies did release periphery information, with both the French and the Germans providing services and manufacturing Indexed data. Despite both the French and the Germans releasing better figures than had been forecast, the information was eclipsed by further scrutiny of the Portuguese bailout petition and Greek debt restructuring. Restructuring of the Greek debt is considered inevitable, and until the Greek government can provide sufficient assurances and a viable solution to these debt troubles confidence will continue to be shaky.

Following the suggestion that one of the front runners in the Finish elections, the True Finns, might seek to prevent the proposed Portuguese bailout, Jyrki Katainen (leader of the party most likely to form the new government coalition), came forward to say he expected little change in the proposal. Despite this attempt to steady the nerves of Finland’s European neighbours the euro seemed vulnerable against the pound throughout the day’s trading; having said that, against the dollar the euro did recover from its worst one-day fall in two months to a price of 1.43. Sterling opened the session at 1.141 and rose in value fractionally to a high of 1.1434, but this gain was lost by mid-morning, and by the European closing bell the pound was trading at 1.1389 (0.8780).

For today the markets will be focussing acutely on minutes from the most recent Monetary Policy Committee meeting. Sentiment is expected to follow broadly along the lines of last month’s release, and CPI figures showing a lessening of the pace of inflation may well see the pound hold at around the 1.13 – 1.1350 mark.

The pound enjoyed a fractional improvement against the green back over the course of the UK session. It has broadly been agreed that the US is unlikely to default on its loans; an opinion which lends weight to the view the S&P’s murmurings over the US’s AAA long-term rating is politically motivated, and calculated to place pressure on President Obama with regards to delivering on his drastic plans for deficit reduction. The UK has seen austerity measures undermine their growth, and the suggestion is that such growth as might reasonably have been expected with the US will be significantly impeded by the $4-5trn in planned savings over the next decade.

Gold and silver prices continued to exceed their previous highs; likewise safe haven currencies such as the Swiss Franc have been the subject of increased interest. With risk aversion re-entering the market one cannot help but feel that short sellers and speculators are driving rate movements, especially in the absence of overt or weighty economic data. So, all eyes will be on the MPC as financial markets are still entertaining expectations of an interest increase in the near term, however key to today’s release is assessing the conviction of those MPC members who have voted to hold rates. Lloyds bank hold their resistance levels for GBP/EUR at 1.18 by year end, which suggests that even a change in sentiment from the MPC fence sitters has already been priced into the value of sterling and indications as to when a rate hike might occur could do little to propel the pound higher as the year progresses.

IN THE UK

• Pound hits highs of $1.6370 against US dollar yesterday as dollar is sold off in favour of riskier currencies.
• Sterling sees slight gains yesterday as market participants look to comments from the BoE minutes today, many believe the comments could reveal the possibility of a rate hike in May.

ELSEWHERE

• Finland’s Prime Minister elect says Finland will not upset Portugal bailout plans
• Euro takes advantage of dollar selling and stay around highs of $1.4429
• ECB member Mersch says Spain is in a different situation to Portugal and Greece, and dismissed rumours of imminent trouble
• Europe’s key economies out perform manufacturing forecasts, but consumer confidence remains weak.
• Japan suffers as trade balance is realised significantly below expectations

DATA TO LOOK OUT FOR

• Headline date this morning is the release of the Bank of England minutes, most analysts expect voting to stay at 6-3, however a swing from this will cause significant GBP volatility.
• Spanish and Portuguese bond auctions this morning, results released 10.30. Good results for Spain will keep the wolf from the door
• US MBA Mortgage Applications and Existing Home Sales will both reveal how the US housing market performed last month. The housing market in the US is one of the Fed’s main concerns and improvements over consensus will support the US dollar.
• 3.30pm sees EIA Crude Oil Stocks change

Current Spot Rates (9.00am) 20th April 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.6360	1.1342	1.5419	1.5587	1.4638	10.09	11.09	135.435
USD		1.4424	0.9425	0.9528	0.8947	6.17	6.78	82.78

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS Pensions, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS (Qualifying Recognised Overseas Pension Scheme) 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.

Euro’s strength Fails While US dollar Gains Back Some Ground

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 (Qualifying Recognised Overseas Pension Schemes) and now QNUPS.

The euro’s recent strength seemed to come to an end yesterday, after the single currency fell across the board after speculation of a debt re-structure for Greece outlined the potential debt problems in the Eurozone.

Greece had secured a €110 billion bailout last year, contributed by the EU and IMF, and the government believe that the country would not make it through the summer without a restructure.

Their overall debt stands at €325 billion, double that of what economists see as stable, and far bigger than Argentina’s when they defaulted in 2001. This added with Portugal’s pending bailout has worried investors that bigger countries such as Spain could fall into the same situation weighed heavily on the euro causing it to lose around 1.5% at its worst against the dollar. The day range was between $1.4421 high and $1.4155 low.

It has also caused investors to worry that the tight fiscal guidelines imposed by the Eurozone government may force countries to opt out of the euro as their individual debt problems escalate.

On the other side of the pond the US dollar gained back some ground as risk avert investors opted for safe haven currencies. The Eurozone news what partly to blame for dollars progression, but the brunt of the risk worry came from the announcement by credit ratings agency S & P to issue a negative outlook for the US Government debt. S & P believe that there is a 33% chance that they will lower the AAA rating that is currently held by the US sometime in the next two years.

The US policymakers are to look at a deficit reduction plan, and will look at ways to save between $4 – 5 trillion over the next 10 -12 years. This could mean following the UK by implicating huge spending cuts in important sectors. There were no major data releases yesterday, and aside from Eurozone Consumer Confidence figures and US Home Starts there are few significant releases today.

The main focus will be on the BoE minutes tomorrow, to see if the current 5-3-1, in favour of no rate hike has changed. German Producer Price Index is also a key data release early tomorrow morning.

IN THE UK

• Quiet day for UK data but pound breaks back through €1.14 against euro, hitting a high of €1.1439
• Eyes move to Bank of England minutes tomorrow, has another voter joined the hawks or does it still stand at 6-3?
• Q1 Preliminary GDP figures are released 27th April; results will undoubtedly have an effect on next month’s interest rate decision.
  

ELSEWHERE

• US dollar responds violently as Standard and Poors warn US that it may lose its AAA rating due to Government debt, dropping outlook to negative.
• News of defaults and debt restructuring in Europe filters around the trading floors in the afternoon and euro falls from $1.4421 to $1.4155.
• Analysts believe other Eurozone countries may also have to re-structure and fiscal pressures may force countries to opt out of the euro.
• RBA minutes reveal little about stance on Australia interest rates, but mention waiting to see full impact of Japan’s quake on their exports
• Gold hit new all-time high of $1497.20
• German PMI drops this morning below consensus although European as whole remains on target, euro remains largely unaffected.

DATA TO LOOK OUT FOR

• Canadian CPI released this afternoon, like the rest of the world inflation is expected to rise. Bank of Canada have left rates on hold at 1% since Sept last year. A figure of 2.8% for the year is expected, anymore would lead to further CAD strengthening.
• 1.30pm sees Housing Starts in US along with Building Permits; both figures are expected to rise.
• At 3.00 Eurozone Consumer Confidence is released, as debt worries plague the EU consumer, confidence is expected to fall to -11
• Japan’s Trade Balance is released just before midnight; the figures are for March and will help to reveal how devastating the earthquakes have been.
  

Current Spot Rates (9.00am) 19th April 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.6266	1.1411	1.5533	1.5686	1.4575	10.19	11.13	134.217
USD		1.4252	0.9549	0.9643	0.8960	6.26	6.84	82.514

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for QROPS Pensions, 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 advice – essential tools for your security.

Sterling Soars High, UK Producer Prices Rise Quickly

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 finished last week on the front foot, pushing to a 15 month high against the US dollar on Friday following some stronger PPI data, Producer prices in the UK rose faster than expected in March and by mid-afternoon was up 0.4% on the day at $1.6387 falling away from a high of 1.6430 hit immediately following the data. UK producer output prices rose 5.4% in March, ignoring forecasts for a slowdown to an annual increase of 5.1 percent.

Sterling has rallied more than 5% this year against the US dollar reaching Friday’s peak, the highest since January 2010. With the dollar under increasing pressure the next target on the horizon would be the 16 month high of 1.6459.

The PPI data may put more pressure on the Bank of England to raise interest rates away from the current level of 0.5% sooner rather than later. However this did not tip the balance in sterling’s favour against the Euro. The battle between the two being focused around interest rates the balance in fact continued to weigh in favour of the Euro finishing off strongly last week and continuing it’s good form this morning following the ECB rate hike last week with Portugal’s request for a bailout being almost completely ignored by the markets.

There is still uncertainty surrounding the monetary policy in the UK and the ‘cloak and dagger’ technique of The Bank of England in contrast to the clarity and positive action seen by The European central bank will more than likely see sterling remain under pressure against the Euro until we see some change. The UK market has the first UK rate interest rate hike priced in for August with the markets now pricing in a second European interest rate hike for July which could provide additional strength for the Euro moving forward. Sterling was trading down against the Euro this morning at 1.1287.

IN THE UK

• Sterling reaches a 6 month high of $1.6430 as concerns continue surrounding economy in the US
• UK PPI data rose 5.4 percent in March, ignoring forecasts for a slowdown to an annual increase of 5.1 percent.
• UK bank shares rise following publication of the Independent Commission on banking interim report.
• Sterling driven lower against the Euro this morning trading as low €1.1287
  

ELSEWHERE

• Following the Euro zone interest rate hike last week the markets have priced in a further rate hike from the ECB for June/July.
• Traders dumped the US dollar on Friday as the Fed maintained its ultra-loose monetary policy, driving EUR/USD close to 1.45.
• Portugal prepares to meet with IMF and EU to discuss parameters of bailout plan
• Despite rumours surrounding Spain being next to require bailout, some believe they will avoid the need, although their housing market is under scrutiny.
• CFTC data show investors have increased euro long positions, essentially meaning investors believe the euro will strengthen.
• New earthquake this morning in Japan may temporarily halt risk appetite, helping the safe haven currencies

DATA TO LOOK OUT FOR

• Very little data released today, busier later in the week
• Fed members Dudley and Yellen both speak this afternoon, likely to be dovish
  

Current Spot Rates (9.00am) 11th April 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.6324	1.1290	1.5450	1.5597	1.4240	10.14	10.85	138.283
USD		1.4458	0.9465	0.9555	0.8723	6.21	6.64	84.711

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 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.