Sterling is spurred by hopes of a big rate cut

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The Bank's monetary policy committee lowered the base rate from 5% to 4.5% last month and is expected to make a similar-size move on Thursday.

City economists say a cut of three-quarters of a point, or even a full point, would be better, given the looming threat of a recession.

Sterling added nearly two cents against the dollar to $1.6366 in early trade, though it slipped against the euro to 78.47p.

The US Federal Reserve slashed interest rates to 1% last week. Critics say having such low borrowing costs helped inflate the housing bubble that led to the current problems.

The FTSE 100 today gave up 11.7 points to 4365.64 in light trading volumes despite a strong rally by Asian markets. Chris Hossain at ODL Securities said: "The Black Mondays of October appear to have been replaced with 'Slightly Grey' Mondays in November."

Investors hope the arrival of a new US President will boost stocks.

Jeffrey Dawking at ETX Capital said: "Whoever wins, the market will have one piece of uncertainty clearly out of the way, which is a plus of sorts. I believe the market already has an Obama victory built into it, but a McCain win would clearly be a bullish, although temporary bullish, trigger. The bear market, however, is still very much a reality."