Some relief for expats as the rally in UK equity markets and improving strength of sterling against the Euro continues. The combined effect of ongoing volatility in both currency and equity markets 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.
Continuing our daily look at factors affecting currencies allows 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.
Thursday saw gains against both the dollar and Euro after sources close to the deal said UK insurer Prudential was pushing ahead with its bid for AIG’s Asian business.
The speculation that the takeover bid could be abandoned was quashed and sterling gained as much as two cents versus the dollar at one point with traders citing expectations that Prudential would need to unwind previous purchases of dollars.
The pound and the US dollar initially gained against the euro, however this movement retraced as investors returned to risk after Chinese officials denied a report the country may be worried about the risk posed to Eurozone debt holdings.
Sterling has risen against the euro recently as investors started buying the pound on the view that the UK’s debt problems are less severe than the Eurozone’s. We have already seen its biggest weekly percentage gain against the euro since November last year.
The UK CBI Retails sales took an unexpected hit in May, due to poor weather and the biggest inflation of prices in two years. It was the biggest one-month drop in the index since January 2005.
This confirmed that a large majority of retailers were seeing falls in sales compared to the 1.8 percent annual sales growth for both March and April. Stores predict more gloom on this front, despite what Howard Archer, chief UK economist at HIS Global Insights, saw as the possibility of higher sales of televisions, alcohol and snacks due to the World Cup.
The Bank of England will also be worried on the outlook of prices, after the consumer price data showed the highest rate of inflation in 17 months in April. Thus there is growing pressure to raise interest rates before the end of the year amid concerns over heightened inflation, although it is believed that they will hold on to the record low base rate for many more months to come.
In the US, first quarter GDP figures were revised down, defying forecasts, growing at a slower rate than earlier estimated. Economists had expected to show that the US economy grew 3.3%, but the true figure was adjusted at 3%.
Following the release of this data, the US dollar was down against the Euro.
Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS 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 to avoid the offshore casino.