Sterling falls, UK GDP figure in-line with expectations

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 or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pensiondrawdown , 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, QROPS and now QNUPS (Qualifying non UK Pension schemes).

Sterling fell broadly on Tuesday against the majority of currencies, mainly based on the back

of Bank of England policy makers keeping the option of further QE firmly open if the UK

continues to display poor data readings concerning first quarter growth.

Sterling hit a five month low against the US Dollar posting lows of $1.5912 before running

into reported demand from sovereign names ahead of an options barrier at $1.5900. It also

hit a near three week low against the Euro posting a low of €1.1132, which opened the way

to a key technical level of €1.1111 (90p). Sterling also hit record lows against the safe haven

currency Swiss franc.

The highly anticipated final reading of the UK GDP figure came in-line with expectations at

0.5% for the first quarter, while the annual growth figure was revised down from 1.8% to

1.6%.

"The downward revision to year-on-year GDP was at the margin another reminder that the

UK economic and financial performance remains deeply worrying," said a currency strategist at FXPro. "It could very easily be argued that the UK needs an evenweaker currency," they added.

This data adds to the view that the UK interest rates will be kept on hold at record lows for

the majority of this year, even running the possibility of them remaining at 0.5% into 2012.

The UK also had further disappointing data in the form of our current account reading

posting a figure of -9.4BN against a forecast figure -5.0BN. The reason why this data is

important is because it's directly linked to currency demand - a rising surplus indicates that

foreigners are buying more of the domestic currency to execute transactions in the country.

The Euro was dominated by the Greece debt story further more as the Euro posted a high

against the US Dollar at €1.4397 in the morning. However further gains look limited against

the dollar, ahead of the Greece parliament vote on austerity measures needed to avert the

Euro zone’s first default.

The Euro played host to a slight boost due to a slight increase in investor confidence on the

posting of positive US house data prices and comments from the ECB head Jean-Claude

Trichet that policy makers were in “strong vigilance” mode on inflation.Trichet’s use of key

word “strong vigilance” shows that a further interest rate hike in July could be on the cards.

Across the pond data was fairly light with only one high impact piece being released in the

form of their CB Consumer Confidence figure at 2.43pm. The figure disappointed estimates

posting a figure of 58.5 against an expected figure of 60.8.

IN THE UK

• Sterling fell against a basket of currencies for the majority of Tuesday’s trading session hitting 5 month lows at $1.5909 and lows of €1.1132 against the euro.
• Final reading of first quarter GDP is kept in line with expectations at 0.5%.
• UK’s current account data misses expectations for the 8th consecutive month running.
• Bank of England’s King says more QE is a possibility but not if it would drive inflation higher, colleague Tucker, disagrees with QE but is firmly in the ‘no change to interest rates’ camp
• This morning UK Mortgage approvals come in slightly lower than expected at 45.94k but the figure shows an improvement from last month’s 45.166k

ELSEWHERE

• GfK German Consumer Climate beat expectations posting a figure of 5.7 against a figure of 5.4.
• Greece debt story remains centre of the headlines, ahead of their parliament vote for austerity measures.
• US consumer confidence misses expectations of 60.8, posting a figure of 58.5.
• US Richmond manufacturing index beats expectations posting a figure of 3 against a forecasted 2.
• In yesterday’s conference Trichet confirms ECB ‘strong vigilance’ stance saying April rate rise will not stand by itself
• Wall Street Journal publishes article that Portugal are to accelerate austerity measures as previous programme not enough.
• Euro strong this morning ahead of Greece vote, GBPEUR falls below 1.11 and EURUSD breaks 1.44

DATA TO LOOK OUT FOR

• Headline data today is the Greek Austerity Vote, all other releases today will be overshadowed by results of the voting and how those results are interpreted. A failed vote could lead to significant euro selling whilst a passed vote could see a slight euro rally. The results are expected between 3 and 6pm
• Eurozone Consumer Confidence is released at 10.00am, the figure is expected to fall slightly to -10 from -9.9
• Swiss KOF Leading Indicators are published at 10.30, also expected to fall to 2.23
• Canadian Consumer Price Index inflation figures expected to be released at 12pm and to post the figure of 0.3%.
• US Pending Home Sales month on month expected at 2.4% and to be released at 3pm.

Current Spot Rates (9.30am) 29th June 2011
	USD	EUR	AUD	CAD	CHF	DKK	NOK	SEK	ZAR	JPY
GBP	1.6012	1.1108	1.5106	1.5663	1.3320	8.2886	8.6616	10.23	10.92	129.827
USD		1.4412	0.9434	0.9782	0.8319	5.1765	5.4094	6.39	6.82	81.081
EUR	0.6939		1.3599	1.4101	1.1991	7.4618	7.7976	9.21	9.83	116.877

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, 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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