Sterling Takes a Hike, Pound Slumped to a Week Low

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).

After a torrid day for the euro zone which has seen much political uncertainty and economic worry over the past week, sterling took advantage of euro weakness climbing to a 2 month high €1.1837. However the pound slumped to a near 4 week low of $1.58, as most investors sold risky assets opting for safe havens.

Sterling is still perceived to be a risky currency, and whilst the Irish political situation stands in the way of a confirmed bailout plan, the dollar is seen to be the safest investment. The euro lost around 1.5% on the day against the dollar, moving below the $1.34 mark, and the attack on a South Korean island by neighbours North Korea damaged market sentiment further.

The market faces a waiting game on the detail of the package, a government surviving on the slimmest of majorities, and a strong belief that even if Ireland is ringfenced through aid, Portugal will become the next fashionable focus," said strategists at Credit Agricole CIB.

Analysts say Britain stands to gain from the stabilisation of the Irish banking system, with the Bank for International Settlements estimating UK banks had $222.4bn exposure to Irish borrowers as recently as September 9th.

In other data releases, there were more negative signs on the state of the UK housing market on Tuesday as the British Bankers' Association said UK mortgage approvals fell to their lowest in more than 1-1/2 years in October. Consensus expected a slightly improved figure from 31.1k in September to 31.3k; however the figure came in at 30.7k.

Germany and the rest of the euro zone did produce some fairly positive data, but the data was brushed away with all eyes firmly on the political situation. German GDP for Q3 came in on par with consensus at 0.7%, bringing the total growth for 2010 to 3.9%. Both German and euro zone PMI figures were also very positive.

In the US Q3 GDP figures were revised up slightly from 1.7% to 2.5%, consensus predicted a 2.4% figure, however existing home sales were down in October from the consensus figure 4.48M to 4.43M.

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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