May Uk Fiscal Numbers As Expected Interest Payments Rise

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).

UK fiscal numbers for May were pretty close to expectations, yesterday. The government’s favoured measure, public sector net borrowing excluding financial interventions, came in at £17.4billion, down from £18.27billion for the same period
last year. The cumulative for the first 2 months of the fiscal year stands at £27.4billion versus £25.9billion for last year, which reflects the fact that last year was boosted by the one-off bank payroll tax, that raised around £3.5billion.

Strip this effect out and ...
... there is an underlying improvement in the fiscal position, with VAT and corporation tax revenues, up healthily. Interest payments continue to rise, which is largely driven by the fact that 20% of UK government debt is inflation linked and inflation is rising sharply. Net departmental outlays are down 1.0% year on year, so there is only tentative signs of spending cuts coming through right now. Although we are experiencing weak economic activity, we expect to see further improvements in the UK’s fiscal position in coming months, although we also expect the progress to be rather slow.

In a separate development, sterling dropped to session lows after one of the policymakers for the Bank of England, Paul Fisher, struck a more dovish tone and kept alive the chances of more Quantative Easing (QE). He said that if the Bank of England’s policymakers saw mid-term inflation turning into deflation, they may have to consider more QE and added QE was very much “on the table” as a policy option.

Over in Europe, Germany’s Zew Economic indicator came out at -9.0, much lower than the expected -1.5. The outcome indicated a drop of 12.1 points compared to the May value of 3.1. The current reading is well below the indicator’s average value
of 26.3 points. The decline spurred pessimism in the markets and especially across the single currency community. This figure dictates that there is great possibility for the German economy to slowdown in the coming months. Germany seems to have
been affected by the financing problems in the heavily indebted peripheral economies and a series of negative economic data for the US economy, from which Germany relies much of its exports on.

Over in the United States, US existing home sales dipped slightly, less than expected in May, as temporary factors and financing problems weighed on the market. In a report, the National Association of Realtors said that existing homes sales declined by 3.8% to a seasonally adjusted 4.81million units in May from 5.05million. Analysts had expected existing home sales to decline 4.4% to a seasonally adjusted 4.78million units in May.An economist for NAR, said “Spiking
gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May.” They added, “Current housing market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward.”

IN THE UK
• UK Public sector net borrowing rises less than expected, totaling £17.4 billion in May
• Sterling drops after BoE policymaker, Paul Fisher flags chance of more QE after Public Finance data painted a dismal picture of the UK’s fiscal position
• GBP hits a low on the back of these comments to a low of $1.6166 and €1.1264 on the day

ELSEWHERE
• German ZEW drops to -9.0, missing poll expectations of -1.5, indicating the potential of a slowdown of their economy in the following months
• Canada core retail sales unexpectedly flat in April after declining by 0.2% in March. Expectations were for a rise to 0.6% in April but was adjusted to only 0.3%.
• US Existing homes sales fell less than expected in May and prices dropped 4.6 percent from a year ago.
• Last night the Greek PM won the vote of confidence, it was expected but does provide relief and helped the euro break through 1.44 against the US dollar
• June 30th is the date for the formal vote on fiscal strategy, if this goes to plan it means the latest tranche of aid will be paid in July
• Italy is under pressure now, potential downgrade and government facing confidence votes.
• No change is expected at the Norges bank interest rate decision meeting

DATA TO LOOK OUT FOR
• All eyes are on this morning’s Bank of England minutes release, due out 9.30am. Will sterling weaken on the back of this after mentioning that potential QE is ‘on the table’?
• 10.00am we have the Swiss ZEW Survey expectations for June
• 10.00am we also have out the Eurozone Industrial New Orders (Year on Year) for April
• Eurozone Consumer Confidence for June due out at 3.00pm
• 5.30pm US interest rate decision, it’s very unlikely to change from their current rate of 0.25%.
• ECB President Trichet and Bank of England’s Governor King, both speak at the European Sytemic Risk Board Press Conference at 5.30pm
• Ben Bernanke speaks at the Fed Press Conference at 7.15pm. Interesting to see what happens with the dollar and what comments are made about the interest rate decision, the end of QE2 and potential QE3

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.

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