Archived IMT (2008.11.13)

Sterling hit a fresh 6-year low of $1.4670 as selling escalated on the expectations of further aggressive BoE rate cuts as early as next month. Following this months 150-bp slashing of interest rates, markets are now pricing more than a 50% chance of a 75-bp cut to 2.25%. With the Bank of England taking a U-turn on its inflation directive, dealers are given a carte-blanche to add on to sell-positions, especially as bank desks seek to maximize their profits ahead of year-end. While this time a year ago selling the US dollar was the path of least resistance among inter-bank dealing, selling the pound is the new riskless trade as perceived by the inter-bank dealing community. $1.46 may transpire at the next European session as markets fret ahead of the US retail sales report.