Archived IMT (2008.11.06)

Sterling Alert: Theres now talk of a 100-bps interest rate cut from the Bank of England (decision at 7.00 am EST) as the shadow Monetary Policy Committee (Committee of well known British economists assuming the role of a fictitious MPC created by the Times of London) votes for the aggressive option. Consensus is split between a 50 bps and a 75-bp rate cut from the current level of 4.50%. Wednesdays 5% plunge in the Dow and S&P500 added to the sharp selling in high yielding currencies and expectations of at least 50-bps by the BoE maintains GBP under pressure. With BoE rate cuts having typically taken the more conservative approach, we see a 60% chance of a 50-bp cut, versus 40% chance for a 75-bp cut. Sterling to remain on the downside, facing resistance at $1.62, with initial support at towards $1.5600 and $1.5300. Any recovery above 1.66 remains untenable before Fridays US labor report.