UK Government Moves To Curb Tax Relief On Private Pensions

In a move that is likely to hurt the most affluent members of society most, the government has announced that tax relief that is applied to money being placed in private pension plans is to be slashed from a ceiling of £255 000 to just £50 000 from April 2011. The Treasury estimates that the move could eventually be worth £4 billion to the exchequer. The cap on the lifetime amount of money that can accrue in a pension fund and still receive tax relief has also been decreased from £1.8 million down to £1.5 million, but this measure will only apply from April 2012.

Pound Sterling – UK Markets

At yesterday’s close, the Pound was trading at €1.1374 and had recovered 0.2% of its value against the single European currency. Following small gains in early trading, Sterling is currently around the same level (1.1384) at 10:35am GMT. Against the Dollar, Sterling is continuing its slow upward trend. The current rate sees the Pound worth $1.6038 (as of 10:35am GMT). As with the other major currencies, this reflects pessimism about the US economy rather than confidence in other economies.

US Dollar – US Markets

The US trade figures were released yesterday and reveal that the trade gap with China has widened to a record $28 billion. The trade balance with the rest of the world worsened by 8.8% to $46.4 billion. Although there was some growth in American exports, it was dwarfed by the rise in imports. Much attention will be focused on the trade balance with China and the fact that today marks the release deadline for a Treasury report on exchange rates that could accuse China of currency manipulation – a move that the administration has stopped short of. Many in Europe and America believe that China does keep the value of the Yuan artificially low to give Chinese exports an edge in overseas markets. The Dollar fluctuated against the Yen in European trading yesterday, but is still trending lower, although the rate of fall may be starting to flatten out. The current value of the Dollar is 81.255 ¥ (at 08:10 GMT).

Euro – European Markets

The Euro has remained above the $1.40 mark against the US Dollar and is currently trading at $1.4083 (at 10:35am GMT). The Euro is also continuing to make modest gains against the Yen and closed last night at 114.43 ¥a gain of 0.2% over the previous close.

Other Currencies – Highlights

The war of words between China and other leading economic nations, notably the USA seems to be heating up. In a mid-term election year, it is likely that both Democrats and Republicans will seek to make political gain out of bashing China for its policy of keeping the Yuan artificially low, as they see it. As noted above, the trade gap between China and the US has set a new record. Chinese authorities have counselled the US not to make the weak Yuan a “scapegoat” for the America’s own economic problems. The Chinese have indicated that the Yuan will rise, but implied that this will be at a time and rate of their choosing. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.