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.