Sterling Gains Improvements against US Dollar & Euro

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 income drawdown, flexible pensionsor QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension drawdown, 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,income drawdown now including flexible pensions, a QROPS and QNUPS (Qualifying non UK Pension schemes).



On Tuesday, Sterling enjoyed a rare day of support and strengthened against all but one of its major peers. The rally came about after data released from the UK’s service sector showed growth in June as volumes of new business continued to rise. The Purchase Managers Index improved to 53.9 from 53.8 for the month of May. According to benchmarks set by Markit Economics Ltd and the Chartered Institute of Purchasing and Supply, a reading above 50 indicates expansion. The Pound welcomed the positive attention as it has slumped this year against 12 of 16 major currencies. Investors have turned their attention elsewhere as austerity measures to shrink the budget deficit slow growth and inflation reduces incomes, at the fastest pace since the 1970s.



"The focus from the market right now is very much on the growth numbers, and positive data outcomes will tend to be supportive of sterling," said the deputy head of economic research at Daiwa capital Markets Europe in London.

The PMI services data release was a positive surprise for the market as it followed on from negative numbers outlining manufacturing and construction which showed a slowdown in growth in both sectors. However when viewed over a quarterly time period, the growth in services look to have slowed to 0.5% in the second quarter from 0.8% in the first three

months of the year. An economist at Markit, said that growth in the sector masked some more worrying signs in some of the other survey indicators.



"Inflows of new business rose at the slowest pace for four months in June, and optimism about the coming year hit an eight-month low. Companies kept headcounts largely unchanged, highlighting a reluctance to expand workforces as a result of the uncertain outlook and renewed weakness of the manufacturing and household sectors." After six straight days of gains against the U.S. Dollar, the Euro was hurt by poor retail sales numbers and on-going negative sentiment towards the situation in Greece. Falls in the single currency accelerated after data showed growth in the Euro zone’s dominant services sector

slowed to its weakest pace wince October. This news, accompanied by poor retail sales figures ramped up investor’s appetite for riskier currencies. With very little data of note released today in the States, the USD held firm against most

currencies with exception of the Euro. The markets are looking to news from the Employment sector due out in the U.S. on Thursday and Friday to provide fresh sentiment for the Greenback.



IN THE UK

• Sterling makes improvements vs. US dollar & euro off the back of UK services PMI data release.

• Headline services PMI number rises but poll highlights economic weakness.

• GBP expected to struggle as the UK rate outlook looks to be extended further.

• Britain sold £3.25 billion of 3.75% bonds due Sept 2021. Investors bid for more than twice the amount offered.

• Afternoon trade remains slow with GBP/EUR fixed around €1.1127 for the majority of the afternoon



ELSEWHERE

• Weak data releases suppress the euro as German PMI Services, Eurozone PMI Composite figures & Eurozone Retail Sales numbers for May all come in below expectations.

• Factory Orders for May in the US fail to hurt a rigid USD

• President Obama releases statement that headway has been made in budget talks, more news to be revealed later.

• Moody’s downgrade Portugal to junk status with negative outlook (from Baa1 to Ba2) on potential contagion spreading from Greece and also suggests that Portugal may need a second bailout.

• Alternative rating’s agency Fitch has had Portugal on negative watch since April so an additional downgrade from them is expected.

• EURUSD falls from highs of $1.4486 to $1.4402 after the Moody’s announcement.

• Wall Street Journal mentions firstly that private bondholder interest in Greece is fading and that Germany has seemed to have done fairly well out of the Eurozone debt crisis and should start to put more attention to the periphery nations.

• AUD strengthens further AUD/USD moving to 1.0734 and GBP/AUD remains below 1.50.



DATA TO LOOK OUT FOR

• At 10.00am we receive the final print of Eurozone Q1 GDP, no change from the previously estimated 0.8% is expected.

• Germany factory orders are released at 11.00am are expected to show a fall in May to -0.5%

• Canadian Building Permits are published at 1.30pm and consensus is for a sharp rise from -21.1% to 5.0% this could help CAD

• 3.00pm sees ISM Non-Manufacturing, a slight fall is anticipated to 53.5

• Overnight Australian AiG Performance of Construction Index for June is released, this is sure to bring on some GBPAUD and AUDUSD volatility at the start of tomorrow’s London session.



Gerard Associates Ltd advises UK residents, expats and people considering living abroad on the technical and currency options available for Pensions, pension income drawdown, flexible 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.