Sterling Makes Gains & Pound rises high Against Dollar

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 made gains across the board on Monday after construction data for March came in at 56.4 which was above market expectations. Overall the figure showed activity slowed slightly from the previous 8 month high release of 56.5 in Feb but this was only marginal. Sterling’s gains were limited as the construction sector only makes up around 6% of the UK’s economic output.

Sterling reached a session high of €1.1372 against the euro up for the low of €1.1312. Against the dollar the pound hit a day’s high of $1.6176 from the low of $1.6112. Sterling was also given a helping hand over anticipation that Vodafone’s deal to sell a stake in Frances’s SFR which could see a €7.75 billion transaction with Vivendi will result in positive currency flows. Analysts stated that the gains for sterling where primarily down to the positive M&A impact though any substantial gains may not occur until later down the line.

Today we will see Purchase managers index data released for the UK which shows the level of activity in the service sector, this will be followed by Manufacturing data and industrial production on Wednesday, all in all investors will be watching these releases closely to see an indication of how the UK economy is recovering after the shock contraction at the end of 2010.

Focus will then turn the Bank of England’s interest rate decision on Thursday where market expectation is for them to hold interest rates at the current record low of 0.5%. With borrowing costs and inflation expected to rise over the coming months a hike may be delayed if key data from the UK signals towards a downturn in economic recovery. Currently markets are pricing in a 0.25 point rise to the UK’s interest rate in July.

Elsewhere the dollar felt pressure after comments made by Fed president Dennis Lockhart increased speculation the central bank will keep borrowing costs low for some time yet. The euro moved away from its recent run of highs after concern mounted that if the European central bank was to increase interest rates it may damage further the economies of the regions most indebted nations such as Spain and Ireland. ECB President Jean-Claude Trichet has signalled that policy members may raise interest rates at their next meeting on Thursday to curb consumer price inflation which is currently at a 2 year high.

IN THE UK

• Construction data for March only drops marginally from February’s 8 month high but still comes in higher than expectations.
• Vodafone to sell a stake in Frances SFR for €7.75 billion which will result in positive currency flows.
• Focus on BoE’s interest rate decision on Thursday where market expectation is for them to hold rates at the current record low.
• Oil reaches $120 a barrel, in GBP terms that means it has hit an all-time high of £74.60
• The pound gains across the board as PMI Services smashes expectations this morning, 57.1 against 52.5. Pound hits €1.1433 and $1.6209

ELSEWHERE

• The dollar comes under pressure after comments from Fed’s Lockhart, believes US rates will be kept low for some time yet.
• Fed Chairman Bernanke released a dovish speech yesterday, concerned about the housing market holding back recovery
• Moody’s cut Portugal’s credit rating from A3 to BAA1, and FT report that Portugal 5 year bonds have reached nearly 10%
• US Treasury’s Tim Geithner says US to reach debt limit in May unless there is quick intervention, failure could trigger a government default and would “spark catastrophic consequences that would last for decades”
• Australia leave their rates on hold as expected
• This morning German PMI shows growth for March coming in at 60.1 from the previous release of 56.9.
  

DATA TO LOOK OUT FOR

• At 10.00am Eurozone retail sales for February are released with expectations the figure will fall to 0.6% from 0.7%.
• 7.00pm tonight the US release their FOMC minutes which reveals appropriate stance of monetary policy

Current Spot Rates (9.00am) 5th April 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.6152	1.1385	1.5647	1.5642	1.4885	10.24	10.88	136.201
USD		1.4186	0.9687	0.9684	0.9216	6.34	6.74	84.325

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.