Pound Under Pressure, AUD in Focus
Sterling was beaten up on Friday as questions arise about the economy ahead of Thursday's election. The new week starts with a modest moves; the euro led last week while the kiwi and yen lagged. CFTC positions showed yen shorts now nearly back to neutral.
The pound fell more than 2 cents on Friday to form a gravestone doji. A similar bearish pattern was traced out on several crosses as the US dollar roared back.
Up next, the focus will be on Australia with the TD Securities' inflation estimate for April due at 0030 GMT. It's not normally a market-mover but traders will be sensitive to Aussie data with the RBA coming up. At 0145 GMT, it's the final HSBC China manufacturing PMI for April. It's expected to improve to 49.4 from 49.2 and is unlikely to
Australian cash rate futures are pricing only a 74.5% chance of a rate cut on May 5, much higher than the 50/50 proposition a week ago. Adding to the swing was a report from PeterMartin of the Sydney Morning Herald that said “concern about a deteriorating economic outlook and a resurgent Australian dollar will force the Reserve Bank to cut interest rates on Tuesday.
On the weekend, colleague Michael Pascoe questioned Martin about the story: “I asked Peter on the record if the story was a drop. He replied: 'I can't say how I got the story. It is accurate.'”
We also remind readers that markets have moved 20-40 seconds ahead of the past 3 RBA decisions.
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR -198K vs -215K prior JPY -6K vs -14K prior GBP -34K vs -29K prior AUD -27K vs -34K prior CAD -21K vs -27K prior CHF +1K vs 0K prior
The still-abundant size of the euro short position underscores just how large of a squeeze is possible in the euro. Yen positioning is nearly neutral. Note that on the weekend Kuroda said the timing of reaching the inflation target will be slightly delayed. He emphasized that stimulus isn't needed but it's the first time he's talked about missing the target.
|49.2||May 04 1:45|
|Eurozone Markit PMI Manufacturing (APR)|
|51.9||51.9||May 04 8:00|