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 income drawdown, flexible pensions or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, 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, income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).
Sterling climbed to a near three week high against a broadly weaker dollar which was still being hurt by Ben Bernanke’s comments in the recent press conferences. Sterling hit a three week high of $1.6195 early in the day as investors continued to sell the dollar after Moody’s warned it could cut U.S ratings as Federal Reserve Ben Bernanke hinted at further policy easing.
Gains for sterling are expected to be limited, with many not ruling out the prospect of further quantitative easing in the UK. “After getting hit hard earlier this week, sterling seems to be very resilient and coming back bid” said a London based stock trader. “I must say this has surprised me more than a little. But think it will trade in a range and would expect to see sellers in earnest on any flirt with the 1.62 area”.
Sterling’s increase against the dollar has primarily been off the back of a bearish outlook for the U.S dollar and has had little do with any signs of improvement in the UK economy. Data on Wednesday showed a sharp rise in the number of Britons claiming unemployment benefit, adding to concerns that stale growth prospects may prompt more Bank of England policymakers to call for additional policy easing. The Italian bond auctions did little to reassure the Euro, despite the bid/cover ratio going reasonably well. The EUR/USD had been supported in Asia gaining to $1.4280, the main cause for this rise was as a result of Bernanke’s comments. The Italian Senate passed through a tough austerity budget, including cuts of 48bn euros. Italy has one of the largest debt mountains in the Eurozone and wants to avoid any need for a bail out. Italy raised 2.97bn euros through the sale of 15 year government bonds on Thursday, but had to offer a 5.9% rate return an all-time high for such bonds.
Across the pond an unexpected rise in auto buying helped US retail sales edge up in June, but consumers remained cautious amid high unemployment, rising inflation and economic uncertainty. Retail sales were up 0.1% in June beating the expectations of a 0.1 percent fall and beating revised a revised 0.1% decline in May.
IN THE UK
- GBP/USD hits a near three week high to 1.6194, but fails to break the $1.62 level
- Sterling gains are still being limited as analyst still speculate whether UK will need further Quantitative Easing
- The pound remains around its 100 day moving average 1.1372 against the euro, despite the recent Eurozone woes many analysts believe GBPEUR will remain low based solely on interest rate differential between the two central banks.
ELSEWHERE
- EUR CPI year on year meets expectation posting a 2.7% year on year.
- More news this morning about US credit ratings, S&P have said they have put US on negative credit watch, suggesting a 50/50 chance of losing their AAA rating. This could happen as soon as in the next month if the debt talks don’t produce an adequate result soon.
- In contrast alternative agency Fitch leaves US as stable outlook.
- UK press have reported this morning that the Eurozone has only 48hrs to agree settlement on ongoing debt issue or could result in two tier euro, I would however take that comment with a pinch of salt given the background work involved in such a plan could take years.
- Italy prepare for a confidence vote on austerity measures ahead of stress tests this afternoon.
- US Retail sales month on month beats expectation posting a 0.1% against a forecast -0.1%
- Ben Bernanke testified to congress for the second day yesterday saying that QE3 is a card he will only play when he needs to, there are other tools available to spur growth and the Fed wants to see if the economy can rebound on its own.
- US core Retail Sales misses expectations posting a figure of flat (0%) against a forecast 0.1%
DATA TO LOOK OUT FOR
- Eurozone trade balance is released this morning, little change is expected and subsequently should not affect the markets too much.
- US CPI is released at 1.30pm and expected to remain at 3.6% for the year.
- US Empire State Manufacturing Index is published at 4.20, a substantial rise on last month’s -7.79
- Headline data today is the Eurozone bank stress test results, they are expected at around 5pm and have been organised to give reassurance to investors that EZ banks are performing adequately and some of the recent debt rumours of Spain and Italy in particular are unfounded. Expect volatility if the results show that too many banks have been hiding skeletons in their closets.
Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible 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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