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.