GBP/USD tripped stops below 1.8600 en route to an 11-week low five pips shy of 1.8575--a touted "alarm call" level, on the back of August's larger-than-expected UK trade deficit (See 42331 ). Cable was already on the defensive into the 08:30GMT release, amid talk of "safe haven" flows into the greenback. Sell interest tight above 1.8700 capped the rate early Europe. Sterling ran into resistance at 1.8619 (pre-UK trade data low) on its rebound rally from the pre-1.8575 low. That rebound was spurred by PBOC Fan Gang's Reuters-reported comment that a steady USD decline is "inevitable".
1.8550 and 1.8500 are among sub-1.8575 bear targets. 1.8619+ resistance levels include 1.8635 (yesterday"s low), and 1.8650 (today"s Asia low). BoE Governor Mervyn King is slated to speak in Winchester at 19:00GMT tonight. King is a perceived hawk, having voted for this August"s 25bp UK base rate hike, and against the August 2005 quarter-point cut. The market currently expects another 25bp UK base rate rise to 5.0% next month (Nov 9). A further increase to 5.25% is forecast for 2007.
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