Cable rallied to 1.9740 offers in early European trade, as the continent absorbed the 8-1 "Shadow" MPC recommendation for a UK rate rise this Thursday (Sunday Times). The market reportedly estimates an approximate 40% chance of a 25bp UK rate hike to 5.5% this week. A Q2 25bp hike is priced in. Further sell interest is tipped at 1.9750, a level above which large stops are tipped.
Sterling last traded above 1.9750 on January 23, a day after notching a 15-year peak of 1.9917. Touted bull targets north of 1.9750 include 1.9850, a level at which exotic option exposure is located. Further exotic option barriers reside at 1.9900, 1.9975, 1.9995 and 2.00+. GBP/USD support points include 1.9718 (Friday's high), 1.9698 (today's Asian session top), 1.9664 (today's Asian session base), 1.9600 and 1.9550.
The rally to Friday's 1.9718 high, from 10-day lows just under 1.9550, was aided by the imposition of US tariffs on Chinese imports of coated paper. Today's key US event risk is the 14:00GMT disclosure of March's ISM manufacturing index. Forecast: 51.1.
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