Two members of the "Shadow" MPC believe that the actual MPC needs to hike the UK base rate by 50bp to 5.25% this Thursday in order to control inflationary pressures (Sunday Times).
A 25bp rise to 5.0% is expected. This forecast 25bp UK rate increase will cut 2007 UK economic growth to 2.3%, according to a report from Oxford Economic Forecasting (BBC website). GBP/USD plumbed a 10-day low of 1.8949 low during the European morning, following the 09:30GMT disclosure of September's softer-than-expected UK industrial and manufacturing production data (See 42332 ).
Cable's subsequent recovery rally ran into resistance at 1.8975 (Friday's post-NFP floor). Some stops are tipped sub-1.8945. These could depress sterling towards noted bids at 1.8935 if tripped. 1.8870 is among bear targets south of 1.8835. 1.8999 (today's Asian session base) and 1.9031 (today's Asian session peak) are 1.8975+ resistance levels. 1.9137 was last Wednesday's 12-week peak.
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