Uk Pmi Construction Figures Better Greece Receives Another Downgrade

By Author: russelmori
Total Articles: 25
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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).

IN THE UK

• UK PMI construction figures are better than expected at 54.0 but markets fail to react in sterling’s favour.
• GBP/EUR hits fresh 4 week lows of 1.1292 and GB/PUSD hits lows of 1.6303
• Pushing the pound down further are reports that one of the Bank of England policy members Paul Fisher has said that if the pace of recovery slows down he will start to vote foradditional quantitative easing.

ELSEWHERE

• Greece receives another downgrade by Moody’s, based on existing ...
... fiscal policy
• Senior EU sources report EU and IMF close to making agreement to provide €60bn in new financing to Greece.
• Trichet calls for separate European Finance Ministry prompting a gain in euro strength
• US unemployment claims data fails to meet expectations, posting a worse than expected figure, putting more emphasis on today’s Non-Farm payrolls figures
• Australian retail sales beats expectations posting a figure of 1.1%
• US policymakers vote against increasing Government debt limit.
• EUR/USD continues to move up hitting a high of $1.4518

DATA TO LOOK OUT FOR

• The UK PMI’s continue this morning at 9.30am with the services figure for May. Estimates are for the figure to fall very slightly to 54.2 from 54.3. PMI Services can have a significant effect on market prices if the figures released are much different to the consensus estimates.
• At 1.30pm in the US, various bits of employment data are released including Average Weekly Hours, Average Hourly Earnings, Unemployment Rate, but the key release is Non-Farm Payrolls. After poor ADP employment figures released earlier in the week, the estimate for today’s figure has been reduced to 100,000. The NFP figure is a key measure of the US labour market conditions and carries huge significance to US
dollar value.
• At 3.00pm US ISM Non-Manufacturing figures are published, the figure is expected to show an improvement in business conditions but could be largely overshadowed by any surprises in the employment figures.

Current Spot Rates (9.30am)
3rd June 2011

USD EUR AUD CADCHF DKKNOK SEK ZAR JPY
GBP 1.6343 1.12881.5329 1.5987 1.3777 8.4158 8.8017 10.15 10.97 131.845
USD 1.4475 0.93800.9782 0.8430 5.1495 5.3856 6.21 6.71 80.674
EUR 0.6908 1.3580 1.4163 1.2205 7.4555 7.79748.99 9.72 116.801

Sterling hit a two-week low versus the Euro yesterday, hurt by dovish comments from a UK policymaker which added weight to the view that interest rates will stay on hold for some time. Sterling/Euro declined to 1.1292 and was on course to test further, this has been the lowest in four weeks, with the pound extending falls suffered Wednesday after surprisingly weak manufacturing data.

The pound failed to gain against a faltering dollar even when being helped by a purchasing managers' survey that showed UK construction activity grew more than expected last month posting a figure of 54.0 against an expected figure of 53.7. The better than expected construction data offered little relief after Wednesday's PMI survey revealed the slowest manufacturing growth since September last year due to the importance of construction data over the likes of service sector and manufacturing sector data. The reaction that did occur was limited as it remains likely the Bank of England will hold rates at 0.5% until a forecasted date of the end of 2011.

Adding weight to this view, Bank of England policymaker Paul Fisher said in an interview with the Daily Mail newspaper that he would consider voting for another round of quantitative easing if the economy worsened. "The data flow from the UK and the Fisher comments suggest the Bank of England is in no rush to raise rates," said a currency strategist at ING.

Despite the Euro zone's debt problems in peripheral countries, the currency has performed well against sterling on expectations the European Central Bank is likely to flag another rate hike in July to try and tame inflation risks. The single currency was also bolstered by rumours of Greece had agreed to austerity steps to tackle its debt crisis, which is key as they are shortly due confirmation of whether they are to receive their 5th instalment of bailout package. Greece was also under further scrutiny as Moody’s proceeded to downgrade the country’s credit rating further justifying the downgrade by arguing that Greece will fail to meet the deficit reduction targets that were set as part of its existing bailout deal.

Trichet’s mid-morning press conference was structured with bullish comments such as the Euro is a credible currency and there is no crisis and that there should be a European Financial Ministry created. Across the pond, there was yet more disappointing data in the form of Unemployment Claims which missed expectations posting a figure of 422k against a forecasted figure of 416k. Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions.

It could also be argued that the market is waiting in anticipation of the Non-Farm Payroll figures expected tomorrow at 13.30pm, the figure is expected to post a figure of 194k, having posted a figure of 244k against a forecast of 185k in May. The barometer for Non-Farm payrolls has already been set from the ADP employment report released Wednesday which missed expectations posting 38k against a forecast 178k; however
this piece of data has a history or breaking correlation and will only be used by traders as a barometer.

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currencyoptions 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.

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