Market Update - 25 March 2013

• New week, new start and we guess we can expect politics to drive near-term risk appetite, but an approaching peak in growth momentum suggests limited risk sentiment ahead. The key risk is weaker growth exacerbating political uncertainty in Europe and of course Cyprus now, but who’s next?
• Honestly,we see limited contagion risk from the situation in Cyprus. Overall, markets seem to be cautious of Euro zone investments but odd enough on Saturday’s Business Times Singapore, PIMCO’s euro zone debt head fund manager actually said despite the woes they still like Europe.

• Italian and Spanish bonds rose this week as investors bet the European Central Bank’s pledge to buy the securities of struggling countries would prevent turmoil in Cyprus from spreading to other high debt and deficit nations.

• USDMYR looks like a good day to buy so far, the pair dipped back down below 3.1000 this morning on profit taking and news of some oil players selling USDMYR. Interesting to track the pair this week to see where it might be heading, a firm break of 3.1000 might see it trade back towards 3.0800 but if it’s a false break then we can see it trade back to the 3.1000-3.1300 range.

• Picked this up in one of the mails this morning, “It will also be important to monitor the political developments in Portugal not only over this week but also over the next month. Last Friday, the Socialist Party, the biggest opposition party, announced in parliament that it will submit a no-confidence vote to overthrow the government, saying that the country was on the verge of an economic and social catastrophe. The vote could be submitted either this week or on the week after Easter.”

• AUDUSD continue to trade higher, currently trading at 1.0450 with upside maybe around 1.0550, but RBA could come in and cap the pair at 1.0600, market is probably positioned to buy on dips.