Pound rises by 5.2%, Sterling rises against Euro

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).

Tuesday was a day of mixed fortunes for the Pound as the positive sentiment felt in the market during the early trading session slowly waned as the day unfolded. The British retail sales data for the month of April showed a stronger than expected rise of 5.2%. This number was the fastest annual pace in five years & was attributed to public holidays and the warmest April on record. As a result Sterling rose to a one month high against the Euro, with further help coming in the form of renewed concerned over Eurozone sovereign debt. The Single Currency fell as low as 87.21 pence (€1.1466) in early trading, its lowest level since April 6th but found some footing after a media report outlined a new financial aid package for Greece. “This week there’s been some demand for Sterling as a diversification against the Euro, and we also had the positive retail sales which helped,” said a senior currency strategist at Rabobank. “Sterling can get a little bit of a reward from the perceived fiscal discipline of the British government….but it will be limited if we continue to see weak UK data over the next few months.”

Positive news for the housing market followed, as a report showing a slowdown in the fall in house prices offered short term support for the Pound. This sentiment was short lived as the market turned its attention to upcoming data and a broader view of the UK’s economy. Today sees The Bank of England release the UK’s inflation report, which the market speculates will include a reduction in its economic growth forecast. The result of such negative news would make a rise in interest rates highly unlikely and such sentiment would be enough to weaken the Pound against both the Dollar and the Euro. Despite inflation figures moving further ahead of the 2% limit, overall downbeat UK data that shows a

patchy recovery in the UK, should be enough for interest rates to remain on hold. In Europe, whilst the Greek debt restructuring issue continued to weigh on market sentiment the interest rate divergence between Britain and the Eurozone began to re-emerge as a talking point. Due to economic woes traders are not pricing in a Bank of England rate hike until December, having priced a mid-year increase back in January. In contrast, the European Central Bank has already started raising rates and markets are pricing in two quarter percentage point increases by December.

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 and QNUPS and investments in a clear format allowing all customers to make an informed choice.

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