Sterling Grounds To Halt Reversing Recent Gains

We continue our daily look at factors affecting currencies allowing 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. Investment market volatility and currency exchange 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. Sterling’s recent gathering of strength ground to a halt yesterday, reversing gains made over the past few days, after more banking issues dented investor sentiment. Britain’s banks were on the receiving end of an £800million tax bill, after the UK Government increased the levy on banks to £2.5billion. The Bank Levy is an annual tax of 0.075% on the value of all of the debts of the UK banks (including money deposited with the banks), except that; • Ordinary deposits covered by the UK’s deposit insurance scheme are exempt. • The first £20bn of any bank’s taxable debts is exempt • The banks only pay half the tax rate on their long term debts The 0.075% rate applies only from May this year. Originally, the Treasury had planned to charge a lower rate of 0.05% during 2011 but in February it changed its mind. The government thinks it will discourage banks from relying on risky forms of borrowing, which were blamed for making the 2008 crisis much more dangerous. The bank levy announcement put the equity market under pressure and it’s taken the steam out of sterling today,” said a senior currency strategist at BNP Paribas. “We think sterling’s going to struggle now given the extent of the rate hikes that have been priced in. Things are swinging back to sterling reacting to more to negative news,” they said. Sterling lost around a cent against the Euro from around €1.1873 to a session low €1.1757. This comes after reaching a 2 week high €1.1918 on Monday. Against the dollar sterling fell from a day high $1.6161 to a low of around $1.6029. The Bank of England Interest rate decision looms on Thursday, however most analysts’ views are that rates will remain where they are and the focus will be on next weeks inflation data and quarterly Bank of England inflation report for any clues to the timing of future monetary tightening. Markets are pricing in a rate hike in May, though they see an 18% chance of a hike on Thursday. This has led to a build-up of long speculative positions in the pound. House prices in England and Wales fell in January but the pace of decline eased for a third consecutive month. The Royal Institution of Chartered Surveyors’ seasonally adjusted house price index rose to -31 from -39 in December, its highest level since July and far better than the consensus forecast of -38. British retail sales bounced back in January after a snow-hit December, driven by discounts and a rush to beat the VAT sales tax rise in the first few days of the month. The British Retail Consortium said like-for-like retail sales were 2.3% higher in January than a year ago, the strongest annual rate of growth since March. 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 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 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.

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