The post Pound Sterling finds support while higher UK gilt yields keep downside intact appeared on BitcoinEthereumNews.com.

The Pound Sterling recovers slightly after facing a sharp sell-off in the last few trading days, with investors focusing on the UK CPI data for December on Wednesday. The weak outlook of the British currency stays afloat amid higher UK gilt yields. Investors await the US inflation data, which will influence expectations for the Fed’s policy outlook. The Pound Sterling (GBP) finds temporary support on Tuesday after facing a sharp sell-off in the last few trading days due to rising yields on the United Kingdom (UK) gilts. The 30-year UK gilt yields have risen to near 5.47%, the highest since 1998, due to multiple tailwinds, such as higher uncertainty about incoming trade policies under the administration of United States (US) President-elect Donald Trump, persistent inflationary pressures and slower growth expectations in Britain. A healthy rise in UK gilt yields has resulted in a discomforting situation for UK Chancellor of the Exchequer Rachel Reeves, who was already facing backlash from employers for raising their contribution to National Insurance (NI) and leaving little fiscal headroom if the situation turns upside down.  Market participants expect the UK government to turn to foreign financing to fund routine spending to avoid rising domestic borrowing costs. However, the British finance ministry maintains its non-negotiable promise to rely on borrowing only for investment, not for addressing day-to-day spending. Meanwhile, investors shift their focus to the UK Consumer Price Index (CPI) data for December, which will be released on Wednesday. Investors will pay close attention to the UK inflation data as it will drive market expectations for the Bank of England’s (BoE) likely interest rate action in the February policy meeting. Analysts at UBS expect the BoE to cut interest rates next month, with more reductions remaining in the pipeline later this year. UBS said that higher borrowing…

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Filed under: News - @ January 14, 2025 8:21 am