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.

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