16:11: Speculative positioning on GBP, USD and CAD looking dangerous

A look at the latest CFTC data shows the US dollar remains the favourite long position amongst speculators.

Adrian Schmidt at Lloyds Bank does however warn that this positioning looks dangerous:

"Long USD positioning remains most extended in GBP, JPY and CAD, though EUR and AUD positioning actually rose more than positioning in these three over the last week. Positioning in all these three looks a little dangerous."

14:45: US dollar strength driven by Japanese Yen weakness to a great extent

The theme of US dollar strength has been prevalent amongst commentators. But how much of this USD strength is derived from Yen weakness?

Stephen Gallo at BMO Capital Markets says the Yen has been influential in US dollar strength, and thus general FX movements:

"Amidst very quiet conditions, the very brief and very slight USD weakness this morning in London appears mainly to have been driven by the comments out of Japan’s Economy Ministry overnight which knocked USD/JPY modestly lower.  Given the inability of the USD to carry on rallying into today, the “JPY-positive” comments from Japan’s Amari overnight serve to highlight just how important JPY weakness has been for helping the USD to strengthen against other currencies in the current FX market environment."

12:05: Inflation figures also to form focus for sterling

Lloyds Bank Research give their views ahead of this week's inflation numbers:

"We, and the rest of the market, expect CPI inflation to have dipped from 2.8% to 2.6% in April, due to Budget effects and the fall in oil prices.

"The risks, however, are skewed towards a weaker reading. The other main event  to watch for is any change in the voting pattern at the MPC meeting. We believe the vote to keep the APF unchanged at £375bn was unchanged at 6:3, although there is a risk that one or two dissenters, including the Governor, may have shifted camp following the more upbeat economic assessment in the latest Inflation Report.

9:18: The GBP is the consensus short

Aurelija Augulyte at Nordea Markets Research tells us on Monday morning that the British pound is facing a bearish bias this week:

"The GBP is the consensus short, it seems. And with the mini uptrend broken, the bears had the chance to raise voices again last week. We put on a GBPUSD long last Thursday, and, respecting the USD strength, consider changing/diversifying the base with e.g. SEK and CHF (my dislikes).

"The GBP net short positions have been trimmed a bit, as hoped for, but not fully yet.

8:45: The British pound is facing a week described as 'anything but trivial' in the view of Lloyds Bank Research.

Market focus is tipped to turn to UK data releases with CPI, BoE MPC Minutes, Retail Sales and Q1 GDP first revision released this week.

"The BoE MPC minutes will likely draw the greatest attention following the relatively more upbeat Quarterly Inflation Outlook; focus will be on the committee’s take on the recent firmer domestic data and the softer inflation outlook. GBP/USD continues to look vulnerable to USD strength, but the low 1.51s should provide decent support," say Lloyds.

8:25: GBP/AUD direction will be dictated by RBA decision

Richard Driver at Caxton FX hints that gains in the AUD are likely related to profit taking:

"The RBA will release the minutes from its most recent meeting this evening, where the bank actually cut interest rates. The minutes should shed some light over where the bank stands on a further interest rate cut. Another cut by the end of Q3 is looking highly likely from our standpoint.

"GBP/AUD trades just below 1.56 this morning and we may see further profit-taking weigh on this pair for now."

7:00: We see further sterling weakness ahead say RBS

The pound vs US dollar is 0.2 pct higher at 1.5199.

RBS have today reiterated their call to sell the pound sterling against the US dollar.

David Simmonds at RBS says:

"I keep finding deeper pockets of UK optimism among clients and a reluctance to embrace the lower Cable trade in which they were much more willing participants earlier this year.

"As the antidote to creeping GBP bullishness, read Ross Walker's excellent Note UK Economy - Green shoots... or weeds? from last week. In remaining "cautiously pessimistic" Ross asserts thus:
 "A flurry of better high-frequency data should not obscure entrenched macroeconomic imbalances and structural impediments. Our central scenario is for a modest pick-up in GDP growth but the defining feature of the UK economy will continue to be protracted deleveraging. Muted income growth, further fiscal consolidation, hesitant business investment and weaker external demand mean many of those green shoots will turn out to be weeds.
"So sticking with Paul Robson's short GBP/USD trade recommendation is a confident call."