On Tuesday, European markets were little changed, as investors awaited for the minutes of Federal Reserve’s last policy meeting and the testimony of its Chairman Ben Bernanke. Banks, Automobiles & Parts and Travel & Leisure were among the worst performing sectors in the broad-based DJ STOXX 600 index, while Basic Resources, Industrial Goods & Services and Chemicals were among the best performing sectors. National Bank of Greece tumbled after announcing details of a share sale. Carnival slumped as the company lowered its profit forecast for the second-half of 2013. United Internet slid after its reported first-quarter sales missed the analysts’ estimates. Sonova Holding retreated after saying that the profit growth will be slow in 2013. ING Groep, Deutsche Bank and Daimler were among the top losers in the blue-chip DJ STOXX 50 index, while Anglo American, Rio Tinto and BHP Billiton were among the top gainers for the day.

On Monday, European markets were volatile as investors awaited FED Chairman Ben Bernanke’s comments on the outlook of US economy. Basic Resource, Insurance and Oil & Gas were among the worst performing sectors in the broad-based DJ STOXX 600 index, while Automobiles & Parts, Travel & Leisure and Media were among the best performing sectors. FirstGroup slumped after halting its dividend payments to focus on rights offer to increase its capital. Ryanair soared after reporting full-year net income that beat the markets estimates. Rheinmetall gained on a broker’s upgrade. Telefonica, BBVA and Anglo American were among the top losers in the blue-chip DJ STOXX 50 index, while Daimler, ING Groep and National Grid were among the top gainers for the day.

Asian markets ended on mixed note on Tuesday as markets in domestic China, Philippines and Malaysia inched up, while benchmark indices in India, Indonesia and Hong Kong declined for the day. At large, weak sentiments in Asia were caused by the minutes of the Reserve Bank of Australia, which showed that the central bank sees weak business sentiment in the country and hence needs to slash interest rates to support growth. Indian markets continued to correct for second successive session. Technology stocks in China continued to lead the rally in the country’s markets as investors continue to perceive that the stocks would offer higher growth vs. broader markets and are cheaply valued at the moment. Elsewhere, presenting its revised budget estimates, the Indonesian Finance Ministry revised up its inflation estimates to 7.2%.

On Monday, most of the Asian markets rallied lead by benchmark indices in Hong Kong, domestic China and Indonesia; whereas markets in India and Korea declined during the day. Markets in Hong Kong and China rallied after the National Bureau of Statistics in China reported that majority of cities tracked by the Chinese government showed that new-home prices rose for April. Moreover, the US consumer confidence for May came significantly above consensus forecasts, boosting investor sentiments across the globe. On the other hand, Indian markets corrected on concerns that the stock valuations may have become expensive post recent rally. Elsewhere, hopes that Japanese utility companies may restart their nuclear plants resulted in a rally in the Japanese markets.

The Swiss franc lost across the board in recent days. EURCHF moved above 1.25, while USDCHF moved above 0.97. The last time that EURCHF moved to 1.25 was in January, when the EURUSD exchange rate hit 1.37. This time, the dovishness of the ECB has pushed that rate down to 1.29. Still, we cannot exclude an overshooting of the CHF weakness in the short term and see especially USDCHF higher. However, we don't see a change in trend, which could lead to much further CHF weakness against the EUR.

A few weeks ago, we have opened an AUDCAD short trade recommendation at 1.06, with target 1.00. Since then, AUDCAD has moved in one straight line lower and hit our target today. We are happy to book decent profits on this trade. Given the continued domestic weakness in Australia, which is likely to persist and a Canadian dollar, which continues to be supported by the domestic as well as upbeat US data, we like to re-open this trade at current spot of 1.001 with stop-loss 1.03 and target 0.95.

Eurozone GDP data for the first quarter was weaker than expected, showing a contraction of 0.2% qoq after a drop of 0.6% qoq in 4Q12. Rather disappointing German GDP growth of only 0.1% qoq contributed to this negative surprise. The EURUSD fell below 1.29 on the news. If anything, the very slow stabilisation into the second half of the year should increase the ECB's focus on more accommodative monetary policy measures. We thus keep our EURUSD forecast at 1.26 in 3 months.

Mervyn King started the Inflation Report presentation with "Today’s projections are for growth to be a little stronger and inflation a little weaker than we expected three months ago. That is the first time I have been able to say that since before the financial crisis." This supports our view that the UK is on a gradual recovery path. It could also mean that King voted against further asset purchases at last weeks policy meeting. The minutes next week will give further insights.

USDJPY rose above 100 for the first time since April 2009, amid rising speculation of Fed slowing its QE program after US weekly jobless claims reached a five year low. Given the decisive break above the psychological 100 level, we see upside risk of USDJPY testing higher levels in the short term. However, we still don't see any fundamentals change to support a clear move higher and therefore would like to stick to our current medium term forecast range of 95-100 at this moment.

A higher USDJPY range of 100-110 would require fundamental changes such as further easing by the BoJ, aggressive purchasing of foreign securities by Japan's investors for the portfolio rebalancing, or the Fed explicitly signalling to slow its pace of QE program. At this stage, we do not expect any of these to occur in the coming months.

We are as consensus, looking for no change of policy rate, as well as the asset purchase program at Thursday’s Bank of England meeting. Still, after the recent action of the ECB and Australia, even non-action of the BoE could lead to a small Sterling rally. More important, in our view, will be next week’s Inflation Report, in which the bank outlines its current views on the economy and in two weeks the minutes of the policy meeting to see if the voting pattern changed. We stay overweight GBP.

After the recent fall of the AUD and given the strength of the CAD we pull the stop loss level of our open position below the entry level. The long CAD, short AUD position was opened at AUDCAD 1.06 with target 1.02 and stop loss at 1.081. As we are approaching our target of 1.02, we lower the target to 1.00 as we remain confident in the outperformance of the CAD over the AUD. However, if things should go into the other direction, we also pull the stop loss in the money at 1.045.