Pound Low Against Euro- Sterling Gets a Boost

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 Schemes) 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).

The pound was under pressure in yesterday morning's trading as we saw it test a 4 month low against the euro.

The euro was given a boost by an unexpected deal to help strengthen a euro zone bailout fund. EU leaders agreed to increase the effective lending capacity of the European Stability Facility to the amount of €440 billion from around €250 billion; this enables the fund to buy bonds of struggling countries in the primary markets and thus offering a bail out option should other countries need assistance beyond Greece and Ireland. The continued hawkish stance on a rate hike which could happen as soon as next month also bolstered the single currency.

The proposed deal does increase investor confidence that the euro zone are looking to sort out any further crisis which overall will strengthen and show support to the euro.

Sterling has weakened after expectations for a Bank of England rate rise has been pushed back, initially many thought we would have the first rise in May which would offer support to the pound but this now moved back to August. The Bank of England last week held rates unchanged as it struggles with continued high inflation and faltering economic growth.

"We have raised the target for our long position to €1.1350 from €1.1574," BNP Paribas said in a note on Monday. "We expect ECB rate hike expectations to keep the medium term outlook for the EUR bullish. Meanwhile, the pound is coming under pressure as UK growth prospects deteriorate."

The pound reached a session high of €1.1576 against the euro up from the low of €1.1506. Against the dollar sterling climbed from the low of $1.6029 to reach the high of $1.6197.

Sterling did receive some positive news in the afternoon as ratings agency Fitch confirmed the UK's triple A sovereign rating with a stable outlook, the rating was underpinned by a high value added, wealthy and flexible economy. They also stated the legacy of the financial crisis weighed on the economic and fiscal outlook but those risks were declining.

Elsewhere the Yen made gains after Japans central bank doubled its asset buying scheme and supplied record funds to banks to increase confidence back to the economy after the devastation of a massive earthquake, tsunami and nuclear emergency.

IN THE UK

* The pound started yesterday's trading testing a 4 month low against the euro of €1.1506.
* Sterling was given a boost in the afternoon after Fitch ratings agency confirmed the UK's triple A sovereign rating with a stable outlook, reaching a session high of €1.1576 and $1.6197 against the dollar.

ELSEWHERE

* Japan still dominates the headlines, the yen gains after their central bank double its asset buying scheme and supply record funds to the banks to increase confidence in the economy.
* Nikkei closes down 11% after yesterday's 6% fall
* The euro was boosted after an unexpected deal to strengthen the euro zone bail out fund, capacity increased to €440 billion from around €250 billion to help bail out countries should the crisis spread further then Greece and Ireland.
* Bahrain / Oman tensions threaten to boil over, Saudi troops enter Bahrain to protect ruling family
* Press reports suggest foreign banks have US$2.5 trillion exposure to Greece, Ireland, Portugal and Spain
* Ireland continues to reject demands for corporation tax rise, still try to renegotiate loan

DATA TO LOOK OUT FOR

* This morning in the UK we have house price index which is expected to show a drop to 3.5% from 3.8%.
* Nationwide Consumer Confidence in the UK is released for February at 9:30am.
* 10am sees Germany ZEW economic sentiment which is expected to increase which could give further support to an already strong euro.
* At 6.15pm the US release their interest rate decision, this is expected to show no change, it will be followed by the FOMC policy announcement.

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for QROPS 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 Pensions, QROPS guernsey info available online.