Market Update - 21 May 2013

• Exciting day ahead with the RBA releasing minutes today at approximately 9.30am our time. AUDUSD overnight had an interesting price action, the pair went from 0.9750 to 0.9820 and then this morning back down to 0.9750 in a short night/morning. Personally I am expecting a dovish/less optiomistic statement from RBA this morning and the pair could test 0.9720 again, but if there’s any hint to a no cut in 4^th June then we could see the pair rally back to 0.9850-0.9900.

• A lot of course also hinges on the Fed’s minutes tmrw as market is keenly anticipating if there is going to be continued easing or if market is going to get the disappointment that Bernanke will signal the start or reduction in easing to cause the Dollar to have a potential sell off?

• Plenty of “Taper Talk” flying around ahead of FOMC Minutes/Bernanke speech. MNI run a piece saying any mention of tapering by Bernanke would be underscored with the caveat that it does not mean an end to QE and could go on for years anyway. Goldman Sachs say they are looking for “any sign that the Committee members are becoming less comfortable with the unemployment threshold” in Wednesdays FOMC Minutes.

• USDMYR not much changed opened around 3.0200 and waiting also on market’s direction today, likely to take the lead from RBA’s minutes shortly. Expected range still unchanged at 2.9900-3.0400. Local news not really taking any effect on the pair but the headlines that caught global attention so far seems to be this group calling the Chinese to be managed out and foreign investors aren’t taking this as a positive sign for the economy going forward.

• A quieter than usual EU session with a public holiday however some major markets were open. Equities on fire, FTSE & DAX traded highest since the Sydney Olympics. A better than exp earnings from Europe’s Ryanair and US M&A activity (Yahoo lifting Tumblr for $1.1bln, Vista lifting Websense for $1bln) were the main drivers.

• The S&P500 faded late on EOD profit taking to be about flat. Eurostoxx50 +0.23%.

• The Yen bounced off its 4.5 year low vs the USD after Japans Economic Minister Akira Amari suggested it had depreciated enough “for now”

• Spot Gold +$32 and snaps a streak of 7 consecutive lower closes....toying with the $1400 level now. On gold price, El – Erian, the co CIO for PIMCO opined that valuation has become divorced from fundamentals, just like Apple.