Cable dropped to 1.8520 bids in early European trade, as the continent absorbed the content of yesterday's 19:00GMT speech from BoE Governor Mervyn King. The overall tone of the speech was hawkish--underpinning the expectation that the UK base rate will be hiked by 25bp to 5.0% next month. However, King did admit that he no longer thinks there is a 50-50 chance that UK CPI will rise through 3.0% before year-end, because of the drop in oil prices.
1.8560/65 sell interest was sated on the recovery rally from 1.8520, with stops above 1.8570 subsequently tripped en route to a high of 1.8580. Fresh hawkish comments from King were attributed as the catalyst for the 1.8570 break. King reportedly told BBC Radio Solent that UK consumer debt is not big enough to affect the UK rate view (Bloomberg). 1.8531-1.8555 was today's Asia range. Noted offers at 1.8590 and 1.8600 represent appreciation obstacles north of 1.8580. On the downside: sub-1.8520 demand is tipped into 1.8500. Today's key event risk is the 18:00GMT publication of minutes from the September 20 FOMC meeting.
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