GBPUSD DROPS AS KRAFT's takeover offer for Cadbury remains unchanged. Part of the reason for GBP gains emerged on expectations that Kraft would improve its offer above the original 10.2 bln. Prolonged strength in equities to boost EURGBP towards 0.8970, while GBPUSD seen vulnerable to $1.6720, with any rebound remaining limited at $1.6880. Sterling 3-month LIBOR rates rise for the 20th straight day, helping to support GBP over last 2 weeks. We expect recurring JPY strength emerging in mid week, with GBPJPY, CADJPY and EURPY seen unable to regain 151.45, 85.15 and 135.50 respectively.