Sterling Gains Against Euro While Pound Reaches A Session High

By Author: russelmori
Total Articles: 25
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We continue our daily look at factors affecting currencies allowing some insight into market conditions affecting exchange rates. Cash and income timing for UK Pensions and QROPS should be considered to maximise the Pension, QROPS and investment income and benefits taken.
Investment market volatility and currency exchange remains a challenge. Things are still very volatile and we are in unique global influencing territory. In conjunction with investment returns, currency exchange continues to concern many expats with UK Pensions, QROPS and now QNUPS.

Sterling managed to make gains against the euro on Friday after concern grew over
the euro zones debt crisis, the situation seems to be deteriorating as Moody’s
downgraded Ireland’s credit rating by two notches and the possibility Greece will
need to debt restructure, this highlights the risk of debt restructuring in some of the
other regions.
Greece said that they won’t restructure on its debt as they made firm plans to carry
out €76 billion in austerity measures and state asset sales to meet budget deficit
goals. ...
... This measure will cut the deficit to near 1% of GDP by 2015, from the targeted
7.4% this year although this is yet to be confirmed.
The pound reached a session high of €1.1345 up from the low of €1.1277, but gains
were limited as there were continued expectations the European central bank will
keep raising rates whilst the UK’s rates will stay on hold.
Renowned Bank of England hawk Andrew Sentance was quoted as saying he was
concerned sterling had weakened more than what was needed and that inflation
could exceed 5% in the near term, this helped sterling’s gains against a broadly
weaker dollar. The pound reached a day’s high of $1.6372 up from the low of
$1.6316, but any impact from Sentence’s comments were limited as he has been
voting for a rate hike for many months.
UK inflation last week came in lower then market expectation thought falling to 4.0%
from the high of 4.4% on the last reading, the pound has also suffered from recent
weak data on the UK economic activity, now the market is pricing in the BoE first
rate rise in October.
The dollar index fell to a near 16 month low on speculation rising consumer prices
won’t be enough to persuade the Fed’s policymakers to change interest rates any
time soon. The Fed have held rates between 0 to 0.25% since December
2008.Expectations that the US monetary policy will remain loose have put continued
pressure on the dollar for some time now. Fed chairman Ben Bernanke has stated
acceleration in inflation is likely to be transitory, whilst Richmond Fed President
Jeffrey Lacker thinks the central bank should end its stimulus programme before
inflation rises further.

IN THE UK

• On Friday the pound reached a session high of $1.6372 and rose nearly a cent against the euro at €1.1345
• Overnight Rightmove reports that UK house asking prices have risen by 1.7% in the last month, but market conditions remain slow as buyers feel the higher prices are unjustified.
• Renowned hawk Andrew Sentance states he is concerned sterling has weakened more that what was needed and inflation could exceed 5% in the near term.

ELSEWHERE

• Concern Greece and Ireland will need to restructure debt and potential default highlights the risk of further debt in other regions.
• ECB members signal they will keep tightening monetary policy this year as their economy strengthens and inflation accelerates at its fastest pace since 2008.
• China will hike reserve ratio requirements by 0.5% from April 21st to a record 20.5% to keep inflation under control.
• The dollar index falls to a near 16 month low on speculation rising consumer prices wouldn’t be enough to persuade the Fed to change interest rates in the near term.
• Euro starts the week under pressure as election gains on Sunday for Euro-skeptic party in Finland will hinder efforts to assist Portugal, Ireland & Greece with EUR/USD falling for the 2nd day to lows of 1.4349.

DATA TO LOOK OUT FOR

• Consumer confidence figures released in Eurozone, despite raising rates and buoyant forecasts, confidence is expected to fall to -11
• US NAHB Housing Market Index figures for April at 3.00pm
• Fed members Bullard and Fisher speak today, last week Bullard’s comments were fairly hawkish and resulted in slight dollar strengthening.

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 Pensions, investments, currency exchange and guidance on taxation in most popular ‘sunnier’ climates. This with the re-assurance and security of UK authorised and regulated advice – essential tools for your security.

Russel Mori writes for Gerard Associates LTD, for more information on
QROPS, QROPS Pensions, QROPS List, QROPS providers, QROPS Guernsey info available online.