Sterling Loses Ground as Dollar Rises with US Companies Hiring

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 Qualifying Recognised Overseas Pension Scheme (QROPS) 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).

Sterling lost ground yesterday against a resurgent dollar after data showed US companies were hiring at a much faster pace than expected, while activity in the UK construction sector contracted in December to 49.1 from a previous 51.8 in November. The forecast was 51.0; however considering the weather the UK has experienced in December it is hardly a surprise the figures fell short.

With construction down and house prices falling, it seems the UK is still on shaky grounds and it’s unlikely we will see domestic interest rates rise in the short term, despite higher than ideal inflation.

US ADP employment change, released at 1.30 pm sent the dollar to a high of $ 1.5452. US private employers added 297,000 jobs in December against November’s 92,000, economists were only expecting 100,000 jobs to have been created.

The greenback rallied against all of its major counterparts, especially sterling. The reading bodes well for Friday’s non-farm payrolls report and may lead the dollar to continue to strengthen Following the employment figures, ISM Non-Manufacturing index also came out better than expected. The figure was expected to be 55.7 but actually came out at 57.10 again lending support to the US dollar.

While sterling remained volatile and the dollar strengthened, the euro was range bound trading between €1.1710 and €1.1797, struggling to break over the €1.18 level.

The European Producer Price index for November rose slightly, from 4.4% to 4.5% strengthening the Euro minimally. European Industrial New orders for October were also released yesterday, forecasted at around 18.4% the actual figure of 14.8% reversed any gains the euro had made and helped keep the euro within the 1.17 range.

All in all a very lacklustre day for the euro.

Elsewhere, the Australian dollar retreated from a 28-year high against the US dollar and weakened significantly against a basket of currencies, as worries over the effects of a flood in Queensland undermined the currency. The area plays a hugely important part in the exports of wheat and coal, and on the back of this the Aussie dollar was hit.

With a mixture of data out today, most of this coming from the euro zone, the markets could be quite volatile. Starting the day off, we have UK Purchasing Manager Index Services.

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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