Sterling falls 3 month low- Pound Still under Pressure

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 fell to nearly a three month low against the dollar on Thursday and broke the key

1.60 support level after being pressured by a broadly stronger dollar, which rose after the

U.S Federal Reserve on Wednesday confirmed it would end its bond buying programme this

month but offered no suggestion of further economic stimulus for the moment, there was a

slight glimmer of hope as the pound did manage to make gains against the Euro.

The pound continued to come under pressure due to Wednesday’s minutes from the last

Bank of England meeting which suggested that the Bank would think about another round of QE if the

economy does not pick up. Sterling was also weakened mid-morning after the release of UK

CBI retail sales dropped to the weakest level in a year, further reducing the prospect of an

interest rate increase this year. The gauge fell to minus 2 from 18 the previous month. The

pound slumped against 10 of the major currencies throughout the morning, as the outlook

for the UK economy remains pessimistic and the chances of a second quarter contraction

increases.

The pound however did manage to bounce back against the Euro as the single currency was

hurt after European Central Bank president Jean-Claude Trichet warned that the Greek debt

crisis was threatening the stability of the Eurozone. Trichet said the financial stability in the

bloc was “flashing red” as the debt crisis threatened to infect the regions banks. This led

some investors to question whether the ECB would carry through the interest rate increase

in July that it signaled at its meeting earlier this month.

Although concerns about the rising inflation have been its top priority, recent business

surveys from the region’s core countries have indicated softening growth. Eurozone

purchasing managers in June confirmed economic activity continued to lose momentum.

“With the PMI data down more sharply than expected, further evidence of slowing growth

along with the risk dashboard “flashing red” due to sovereign uncertainties may prompt the

markets to question a July rate hike, leaving the euro venerable” said analysts at

Bank of Tokyo-Mitsubishi UFJ.

This helped GBP/EUR hit a high of 1.1298, just shy of the key 1.13 level and EUR/USD to hit

a high of 1.4333 before falling back.

IN THE UK

GBP/USD falls through the key support level of $1.60 to fall to a 12 week low of $1.5936
UK CBI retail sales fall to the weakest level in a year further reducing the prospect of an interest rate hike this year.
Investors still speculating as to whether or not Bank of England will enter into further QE
Remortgaging drops as house purchase approvals remain static
Despite falling against many of its counterparts, GBPEUR rises and hits a high of €1.1298, helped by a flagging Euro.

ELSEWHERE

EUR/USD falls below the key $1.42 level to hit a low of $1.4152 having been over $1.44 a few days before
US new home sales drop 2.1% in May
Gold cuts 4 day rally as Fed boosts the dollar
EU leaders pledge in Brussels to stabilise the Greek economy provided austerity measures in Greece are passed next week.
The risk here is that sources in Greece suggest that the planned budget cuts might not be passed and the bailout of around €78 billion will be withdrawn.
Making the situation worse for the Greek PM, a two day strike is planned next week in protest of the austerity measures.
German IFO figures published this morning are slightly better than expected but have little effect on euro value.

DATA TO LOOK OUT FOR

The main market interest over the coming days will be regarding Greece and news from the EU summit that finishes today. There seem to be a variety of rumours regarding lack of communication and control by the EU so there could be further developments over the weekend.
Mervyn King speaks today regarding the UK economy and the value of the GBP. Any negative comments will send sterling tumbling
US Q1 GDP 3rd release due out at 1.30pm, expectations are for this to come in at 1.9%, anything above will strengthen the dollar
US durable goods orders for May, census are this will come in at 1.6%

Current Spot Rates (9.30am) 24th June 2011
	USD	EUR	AUD	CAD	CHF	DKK	NOK	SEK	ZAR	JPY
GBP	1.5956	1.1208	1.5154	1.5645	1.3367	8.3608	8.7308	10.29	10.89	128.451
USD		1.4227	0.9497	0.9805	0.8377	5.2399	5.4718	6.45	6.83	80.503
EUR	0.7029		1.3521	1.3959	1.1926	7.4597	7.7898	9.18	9.72	114.607

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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