Focus Shifts to RBA, GBP Shorts Building

The week begins with a focus on Australia ahead of the March 5 rate decision. The Australian dollar opens the week near 1.02 and just 50 pips from a 9-month low. We also look at the latest speculative positioning numbers.Economists overwhelming believe the RBA will hold rates at 3.00% on March 5 but there is a small minority that expects a rate cut. The interest rates market is also pricing in a 26% chance of a cut. 8 Premium trades are in progress, including 2 in EURUSD. 9 Premium trades hit all targets over the past 8 days, including 2 EURUSD shorts, 2 GBPUSD shorts and all gold, silver and oil trades. EURJPY and AUDJPY shorts were stopped out. For the latest trades, visit the Latest Premium Insights. Interestingly, we are seeing JPY resuming its losses as stocks applaud the US data and the possibility for further gains in indices alongside a neutral to strong USD.

One final factor may be the TD Securities inflation expectations report for Feb. It will be released shortly after the market open at 2330 GMT. A rise from the 2.5% January rate could diminish the chance of a rate cut.

An article in the Australian press caught our eye. It was about the oil company ConocoPhillips. Executives there said they were selling assets in Australian natural gas and Canadian oil in order to invest in US energy.

The story underlines a theme that will last for years – investment in US energy. It also highlights where that investment would have otherwise gone.

On top of the growing investment in the United States, the economy continues to show signs of strength. The February ISM manufacturing index rose to 54.2 compared to 52.5 expected. In addition, the forward-looking new orders component rose to the highest since April 2011.

Commitments of Traders - The weekly speculative futures positioning data from the CFTC:

EUR -9K vs +19K prior JPY -65K vs -66K prior GBP -36K vs -23K prior AUD +26K vs +44K prior CAD -21K vs +19K prior

One of the reasons Ashraf has continued to recommend cable shorts was that positioning was relatively neutral in GBP. That is beginning to change but it still hasn't reached the -60K extreme of October 2011.