This week"s key UK event risk is tomorrow's 09:30GMT disclosure of December inflation figures. Annualized CPI is forecast to rise to 2.8/2.9%--although there is a chance that it might come in as high as 3.1%. BoE Governor King is duty-bound to write a letter of explanation to Chancellor Brown if CPI comes in above 3.0%. CPI rose to 2.7% in November, from 2.4% in October.
The BoE MPC saw an advance estimate of tomorrow's UK inflation figures ahead of last Thursday's unexpected 25bp UK base rate hike to 5.25%. GBP/USD rallied by three-quarters-of-a-cent to 1.9670 offers during the London morning, with buoyancy aided by the M&A news that Smiths Group has sold its aerospace division to GE for $4.8bn in cash (FT website). Noted bull targets north of 1.9670 include 1.9700, 1.9730, 1.9750, 1.9580, 1.9900, and 2.00.
Cable elicited support just below 1.9650 on its pullback from 1.9670. 1.9650 option strikes expire at the 10am NY cuts today and tomorrow. Tomorrow will also see Sentance deliver his first ever speech since joining the BoE MPC last Autumn. Besley speaks Thursday.
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