Sterling Rise brings Some relief to the Policymakers
Sterling Rise brings Some relief to the Policymakers
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).
Wednesday saw UK trade deficit narrow in January to its smallest in nearly a year, which was largely put down to record exports of oil which helped drive a recovery from the worst reading on record in December. This helped sterling climb 0.3% against the Euro hitting a high of 1.1676 before retracing and spending most of the day around the 1.1650 level.
This improvement will help provide some relief to policymakers who were hoping that the trade deficit will help spur on the economic recovery. Britain's goods trade deficit narrowed to 7.03bn in January from the poor 9.69bn in December, Economists had forecast a more modest fall to 8.5bn. Economists did however caution that the monthly trade figures were always volatile and December's worst ever recording was largely caused by the severe weather that caused so many disruptions.
"Today's number is encouraging bit there is clearly a lot of short term volatility in these figures" said an economist at RBS. "The underlying positive is still that trade is making only a relatively modest contribution to GDP growth"
Elsewhere the Euro weakened as the cost of insuring against a default in Portuguese government debt rose to its highest level since January as well as Greek unemployment hit a record high. This caused EUR/USD to fall back to a level seen last week before Jean Claude Trichet came out with his "strong vigilance" a comment used throughout 2005-2008's rate tightening cycle which paved the way for rate increasing at the next meeting. EUR/USD fell to a level of $1.3856 as a result.
In recent months the Euro has pushed higher on the back of interest rate expectations, the debt crisis is starting to remerge but if we are being honest it never really went away it was just brushed under the carpet.
As a result of the European debt problems this has seen dollar strengthen, causing GBP/USD to fall to a level of $1.6140, the main question will be is if the dollar can maintain the move?
A lot of economists think the prospect of Fed rate expectations is a long way away compared to the UK and Europe and predict this could cause dollar weakness in the coming months.
IN THE UK
UK Trade Balance narrows to 7.03bn compared to predicted 8.5bn predicted.
Sterling rallies against the euro to hit a level of 1.1671, then retraces spending remainder of the day in the 1.1650 territory
All eyes are on the MPC rate decision out today, economists predict no change at 0.5%
GBP/USD falls to $1.6140 as dollar enjoys strength as Euro weakens
This morning UK industrial and Manufacturing Production both print better than expected figures.
ELSEWHERE
Euro debt concerns weigh heavily on the single currency causing it to fall across the board.
US Wholesale Inventories increase 1.1% helping the dollar's recovery.
German industrial production for January rises 1.8%.
Investors feel prospect of a US rate hike is a long way off, which could cause dollar to weaken in coming months.
DATA TO LOOK OUT FOR
Bank of England's interest rate decision, no change is predicted to current policy.
At 1.30pm US Trade balance is expected to come in -$41.40bn, the deficit is expected to rise as imports rise.
US initial jobless claims due out at 1.30pm is expected to come in at 368k.
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.
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