Sterling Rises a Week high, Greece’s rating at CCC

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 pushed to over a week high against the euro yesterday pushing to around €1.1360

as concerns over the euro zone debt crisis coupled with expectations of rising inflation

figures in the UK strengthened the pound. Eurozone policymakers are yet to come to an

agreement as to whether private investors would be a part of the Greek debt re-structuring.

Greece has now been branded with the world’s lowest credit rating by ratings agency

Standard & Poor’s, who have stated that they feel that Greece is becoming ‘increasingly

likely’ to face debt re-structuring leading to the first sovereign default in the euro zone’s

history. Greece’s rating now stands at CCC.

Yesterday was a quiet day for data release, volatility was kept to a minimum in some of the

major pairings. Against the dollar, sterling also rose and looked supported near-term,

reaching a day high $1.6389, staying above its 100-day moving average at $1.6246 and well

above a low of $1.6215 hit on Friday in response to figures showing a sharp contraction in

UK industrial output.

Investors eyes will be fixed on inflation figures and the Bank of England reaction surrounding them. CPI is predicted to come in unchanged at 4.5% for May but even if inflation figures rise it may see

Sterling make initial gains, however these gains may not be sustained if the Bank of England don’t

respond by raising rates in the nearer term.

"Even if we get strong inflation data, say 4.7%, it's very unlikely the majority of the

Bank of England Monetary Policy Committee are going to start voting for a rate hike," said a senior currency strategist at Rabobank.

A recent run of weak UK data has forced the Bank of England to push a rise in interest rates back, and

markets are not pricing in a rise until at least April 2012, as they fear that a rise in rates

would be detrimental to the Economic growth in the UK.

Other data release today includes Producer Price Index in the US, which is expected to show

a slight reduction from 0.8% in April to 0.1% in May, and retail sales in the US are expected

to drop from 0.5% in April to -0.3% in May. Wednesday will see a U.K gilt auction, with

£2.25billion worth of debt being auctioned off.

IN THE UK

• Sterling pushed to 1 week high against the euro €1.1360 yesterday
• Although a quiet day for data release the pound held against the dollar moving to a day high $1.6389
• Strong inflation data may see sterling gain initially, but the interest rate reaction will be the key to sustaining any gains.
• A recent run of poor UK data has made a rate hike unlikely until April 2012, due to the fear that a rate hike could be detrimental to economic growth

ELSEWHERE

• Euro Zone debt crisis sees Euro weaken across the board.
• Policymakers in the Eurozone are yet to come to an agreement as to whether private investors will be a part of debt re-structuring
• Ratings agency Standard & Poor's downgrade Greece, and have now been branded with the World's lowest rating of CCC, as the likelihood of a debt re-structure looks increasingly
• Yesterday Spanish and Portuguese bond auctions come under pressure, the Portuguese 10 year yield has hit its highest level since the beginning of the euro in 1999
• The US continues to be in considerable debt problems as the government sit at their $14.3 trillion debt limit, the Treasury’s Tim Geithner has urged Congress to raise the limit, but in the meantime ‘extraordinary measures’ have been untaken to reduce the Treasury’s exposure.
• Belgium face a possible downgrade today.

DATA TO LOOK OUT FOR

• A busy day for data today starts with UK inflation figures, Retail Price Indexes and Consumer Price Indexes. Some sources expect the numbers to cool off a little and this would help support the argument to not increase UK interest rates. If this is the case then the pound would probably lose any of its recent gains. If prices remain high then the pound should maintain its current levels or even rise.
• CB leading Indicators released at 10.00 give an overall view of the UK economic conditions.
• At 1.30pm in the US Producer Price Index and Retail Sales are released, like the UK, the figures will give an indication of how the economy is performing and how price pressures are effecting the economy. The US is unlikely to raise rates this year so it would be helpful for policy if inflation remains near target.
• New Car Sales are released in Canada at 1.30pm and are expected to fall slightly.
• Retail Sales figures are released in NZ late this evening and are expected to show a big improvement from the previous quarter.

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.

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

QROPS | Pension Drawdown | Capped Drawdown

Sterling Makes Gains & Pound rises high Against Dollar

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 made gains across the board on Monday after construction data for March came in at 56.4 which was above market expectations. Overall the figure showed activity slowed slightly from the previous 8 month high release of 56.5 in Feb but this was only marginal. Sterling’s gains were limited as the construction sector only makes up around 6% of the UK’s economic output.

Sterling reached a session high of €1.1372 against the euro up for the low of €1.1312. Against the dollar the pound hit a day’s high of $1.6176 from the low of $1.6112. Sterling was also given a helping hand over anticipation that Vodafone’s deal to sell a stake in Frances’s SFR which could see a €7.75 billion transaction with Vivendi will result in positive currency flows. Analysts stated that the gains for sterling where primarily down to the positive M&A impact though any substantial gains may not occur until later down the line.

Today we will see Purchase managers index data released for the UK which shows the level of activity in the service sector, this will be followed by Manufacturing data and industrial production on Wednesday, all in all investors will be watching these releases closely to see an indication of how the UK economy is recovering after the shock contraction at the end of 2010.

Focus will then turn the Bank of England’s interest rate decision on Thursday where market expectation is for them to hold interest rates at the current record low of 0.5%. With borrowing costs and inflation expected to rise over the coming months a hike may be delayed if key data from the UK signals towards a downturn in economic recovery. Currently markets are pricing in a 0.25 point rise to the UK’s interest rate in July.

Elsewhere the dollar felt pressure after comments made by Fed president Dennis Lockhart increased speculation the central bank will keep borrowing costs low for some time yet. The euro moved away from its recent run of highs after concern mounted that if the European central bank was to increase interest rates it may damage further the economies of the regions most indebted nations such as Spain and Ireland. ECB President Jean-Claude Trichet has signalled that policy members may raise interest rates at their next meeting on Thursday to curb consumer price inflation which is currently at a 2 year high.

IN THE UK

• Construction data for March only drops marginally from February’s 8 month high but still comes in higher than expectations.
• Vodafone to sell a stake in Frances SFR for €7.75 billion which will result in positive currency flows.
• Focus on BoE’s interest rate decision on Thursday where market expectation is for them to hold rates at the current record low.
• Oil reaches $120 a barrel, in GBP terms that means it has hit an all-time high of £74.60
• The pound gains across the board as PMI Services smashes expectations this morning, 57.1 against 52.5. Pound hits €1.1433 and $1.6209

ELSEWHERE

• The dollar comes under pressure after comments from Fed’s Lockhart, believes US rates will be kept low for some time yet.
• Fed Chairman Bernanke released a dovish speech yesterday, concerned about the housing market holding back recovery
• Moody’s cut Portugal’s credit rating from A3 to BAA1, and FT report that Portugal 5 year bonds have reached nearly 10%
• US Treasury’s Tim Geithner says US to reach debt limit in May unless there is quick intervention, failure could trigger a government default and would “spark catastrophic consequences that would last for decades”
• Australia leave their rates on hold as expected
• This morning German PMI shows growth for March coming in at 60.1 from the previous release of 56.9.
  

DATA TO LOOK OUT FOR

• At 10.00am Eurozone retail sales for February are released with expectations the figure will fall to 0.6% from 0.7%.
• 7.00pm tonight the US release their FOMC minutes which reveals appropriate stance of monetary policy

Current Spot Rates (9.00am) 5th April 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.6152	1.1385	1.5647	1.5642	1.4885	10.24	10.88	136.201
USD		1.4186	0.9687	0.9684	0.9216	6.34	6.74	84.325

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

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.

Sterling continues to lose, Euro too ends week at loss

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 continued it loses from Thursday in Friday’s session against both the US dollar and the Euro. Causing cable to open $1.16145 but fall down to what remains a strong support level of $1.1605, proving there might be some support for sterling after it now appears interest rates may not be hiked as quickly as anticipated. The short reason for Sterling’s decline is largely due to Moody’s outlook, which highlights a continued downturn in UK growth. “Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the U.K.'s sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the UK's debt metrics to deteriorate to a point that would be inconsistent with a AAA rating,". This leaves the Bank of England in an awkward place and could see them sitting on the fence for some time to come. After the mixed reports this week with inflation at a 2 year high of 4.4%, we would expect rates to rise. However, MPC minutes and retails sales figures released on Wednesday suggested otherwise. So the questions will continue over the coming months of ‘will they won’t they’ raise rates, the outcome proving instrumental in how Sterling will perform in the markets.

The Euro fell against the USD and ended the week at a loss, trading late Friday afternoon at 1.4075. This came after Standard and Poor cut Portugal’s credit rating by two notches also the EU summit continues with no clear strategy emerging on how they will combat the debt fears of the peripheral nations. German IFO figures came out early in the trading morning but only slightly pushed the single currency against the greenback. Investors are now start talk about the collapse of the Euro as the debt crisis resurfaces.

The US made gains about both sterling and the Euro in the market after GDP figures rose by 0.3% to an annualised rate of 3.1%, however against the commodity linked currencies it was mostly lower as investors are looking for higher returns. This has pushed both the NZD and AUD up in the markets both moving 2 cents on Friday against sterling.

ECB members are being urged to look at Japans economic history by investors who suggest learning from the mistakes made in the 1990’s. Where higher interest rates were put in place to curb inflation. Some economists are now backing the doves of UK and EU central banks and suggest letting the markets settle themselves is the best approach.

Today is mostly focused around the US with Pending home sales expected out better at 0.7% compared to a previous -2.8% and personal consumption expenditure also improved at 0.6% compared to 0.2%, hopefully giving the dollar a boost and possibly pushing it below the key levels of $1.40 and $1.60 against the Euro and sterling respectively.

IN THE UK

• Sterling fell on Friday afternoon against the US dollar dropping below the key $1.60 mark over the weekend.
• Against the euro, the pound falls to lowest level since early November, spending most of the session below €1.14.
• Sterling’s decline comes after business confidence sits at a 2 year low and a possible ratings downgrade by Moody’s.
• The UK had a mixed bag of reports last week, which leaves the prospect of an interest rate rise still unknown. Market participants believe this week’s movements will be based on relative interest rates, especially as US head towards the end of QE2

ELSEWHERE

• Standard and Poor cut Portugal’s credit rating by two notches
• Euro fell against the US dollar and ended last week at a loss, trading late afternoon at $1.4075.
• US dollar makes gains as US economy grows slightly faster than expected, a rise of 0.3% to hit 3.1% on an annualised basis.
• Hawkish comments from Fed over the weekend help the US dollar during trading this morning.
• German Chancellor Merkel’s party lose control in Baden Württemberg but euro still remains well supported.

DATA TO LOOK OUT FOR

• US Pending home sales expected out better at 0.7% compared to a previous -2.8%
• Personal consumption expenditure also improved at 0.6% compared to 0.2%, possibly giving the dollar a boost
• Japanese retail trade expected at -0.5% compared to a previous 0.1%
  

Current Spot Rates (9.00am) 28th March 2011
	USD	EUR	AUD	CAD	CHF	SEK	ZAR	JPY
GBP	1.5982	1.1348	1.5518	1.5666	1.4685	10.20	10.97	130.592
USD		1.4106	0.9710	0.9802	0.9188	6.38	6.86	81.712

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

This with the reassurance and security of UK FSA authorised and regulated advice - essential for your security.