Francesco Pesole, an FX Strategist at ING, notes that the CFTC FX positioning data, covering the period 15-21 January, shows net sterling speculative positions at 13% of open interest, down 3.2% - after consistently rising since the end of November 2019.

"This measure has recently lost its correlation with spot movements in the pound, and speculation about a possible Bank of England rate cut at the 30 January meeting seems to have contributed to this dynamic. While talk of easing has limited the pound's upside, it has only marginally affected buying among speculators. Last week’s relatively marginal correction in positioning has done little to dent the view that speculative investors remain broadly sceptical about the possibility of a cut."

"We are not expecting a BoE move on Thursday, but the market is pricing an approximate 60% probability of a cut, despite the long-awaited PMI numbers on Friday beat expectations."

"Dollar speculative buying remains subdued in general, although EUR/USD net positioning appears to be stuck in a tight range again as low appetite for the common currency prevents it from taking advantage of USD selling. It must be noted that the data does not cover the European Central Bank meeting on Thursday 23 January, which triggered a drop in the pair."

"The spread of the coronavirus and the related market fears had not hit speculative sentiment by the time the data was collected on Tuesday 21 January. Net positioning in the Japanese yen dropped for a second consecutive week, consolidating the currency’s role as the biggest G10 speculative short."

"Speculative buying on the Swiss franc kept rising in the week under analysis, which continues to indicate market appetite to test the SNB's limits for an intervention. Such appetite appears to be confirmed by the EUR/CHF response to the market-friendly news on Italian politics (ruling coalition winning key regional elections). This prompted a jump in Italian sovereign bonds, which are usually well correlated with the pair."