Sterling's retreat from a UK rate hike-fuelled eight-day peak of 1.9538 has extended to lows just shy of 1.9440. Sell interest was previously tipped at the latter level, prior to the UK rate rise shock. Sub-1.9440 support points include 1.9422, 1.9410, and 1.9385. 1.9422 was yesterday's top. Highs just shy of 1.9410 were notched during the London morning (pre-hike).
A quarter-yard+ 1.9410 option strike rolls off at today's 10am EST NY cut (15:00GMT). GBP/USD was trading circa 1.9385 into the UK rate verdict. The unexpected 25bp hike delivered by the MPC, and the content of their accompanying statement of explanation (BoE website), has given rise to conjecture that next Tuesday's UK inflation data may surprise on the upside.
Annualized UK CPI rose to 2.7% in November. 2.0% is the BoE's target level. Should CPI come in above 3.0%, BoE Governor Mervyn King is duty bound to write a letter of explanation to Chancellor Gordon Brown.
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