Sterling Rises While U.s. Employment Growth Halts

By Author: russelmori
Total Articles: 25
Comment this article

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).

Sterling rebounded against the dollar on Friday, after much weaker than forecast US jobs data drove investors who had added bullish bets on the greenback in expectation of a strong number to unwind those positions. Sterling rose to a session high of $1.6078 reversing earlier losses, with investors now targeting the July 6 high of $1.6090. The short covering also helped the pound advance against the euro, with the common currency last ...
... down 1% at €1.1243 . U.S. data showed employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dashing expectations the economy would regain momentum in the second half of the year.

Analysts expect investors to sell into sterling's latest rally, although near-term support remained robust around Friday's low of $1.5930 with traders citing bids from Asian central banks and corporate buyers. Earlier, the pound barely reacted to data showing Britain's construction industry struggling to grow in May and an unexpectedly strong rise in UK factory gate inflation, which climbed to its highest level since October 2008. The weak data along with the high prices did little to shake the market view that the Bank of England is committed to loose monetary policy and unlikely to raise interest rates before next summer. In the U.S., short-term interest rate futures traders are betting the Federal Reserve will stay on
hold well into 2012 after the June jobs report. Traders, who had thought the Fed would likely begin raising rates by the July 2012 meeting, slashed those bets and they now see just a 36% chance of a such a hike.

EURO WHIPPY BEFORE STRESS TESTS

While the dollar sold off broadly after the jobs numbers, the euro failed to get much of a lift. The euro was down 0.3% against the dollar at $1.4320 , with investors wary about the single currency amid lingering concerns about debt contagion.
Traders said against the pound, the euro has support around 88.595 pence -- the low hit on June 27 -- and then around 88.50 pence, the 50% retracement of the euro's rise from a low of 86.11 pence on May 26 to its 15-month high of 90.84 on July 1.

Earlier, the euro had come under pressure on a European Union draft report outlining measures to deal with weak banks and the suspension of trade in shares of Unicredit. The single currency then bounced back, with traders citing a Reuters report saying all five Italian banks covered in EU stress tests had passed. Overall, Schmidt at Lloyds said investors will be wary of adding euros to their portfolios ahead of the results of EU-wide bank stress tests next week. The euro had risen to a 15-month high against the pound earlier this month as a result of the single currency's favourable interest rate differentials. On Thursday, the European Central Bank hiked base rates to 1.5% and markets have priced in another rise this year, although some analysts expect it to take a pause

IN THE UK
• The pound had little response on Friday to a rise in Producer Output prices on Friday as investors felt the information was not enough to warrant a shift in interest rate speculation.
• However, after lunch GBP/USD spiked almost a cent to 1.6073 as disappointing employment data in the US causes a USD selloff
• The pound rises this morning to a high of 1.1299 against a slightly weaker euro as debt worries remain in the news.

ELSEWHERE
• Friday’s much anticipated US employment figure are significantly worse than expected, some experts were hoping for a figure over 100k, the posted figure was 18k the lowest rise since September 2010.
• Unemployment rate in the US follows week Non Farm Payrolls data and rises to 9.2%.
• EURUSD falls to a low of 1.4138 after reports suggest that the debt problems are going to hit Italy. Europe’s 3rd largest economy would require the EU bailout fund to be doubled to 1.5 trillion euros if intervention was needed.
• Markets are now beginning to think the euro is a dangerous bet, many have felt that it has been overpriced recently and despite all negative press never seems to go down. Whilst EUR/USD and GBP/EUR would appear to support this comment EUR/CHF, EUR/JPY and EUR/NZD all within 20 pips of multi-year lows.
• AUD suffers slightly as Chinese inflation is slightly higher than expected and China says they will be watching monetary policy closely.
• The US debt talks will continue today, no progress has been made and there are just 3 weeks to go before deadline of 2nd August to reach a resolution.

DATA TO LOOK OUT FOR
• Quiet day of data today includes Norwegian CPI figures
• Canadian House Starts at 1.15pm followed by Bank of Canada Business Outlook Survey for Q2.
• EU Finance ministers meet today to discuss amongst other things Italy and to prepare to accept Greece’s should default on some of its bonds.
• President Obama continues debt talks with members of congress and treasury.
• Overnight tonight in the UK RICS release the Housing Price Balance, the figure is expected to show a slight improvement in housing market condition and move up from -28 to -25.

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.