The UK 10-year gilt yield edged down toward 5.3% as the recent rally in energy prices paused and investors processed key data ahead of next week’s policy meetings in both the UK and the US. Yields, however, remained close to 19-year highs, while the 30-year gilt yield hovered near 6%, a level last seen in 1998. UK GDP expanded by 0.4% month-on-month in July, exceeding expectations, and growth over the three months to July also held at 0.4%.
Markets currently expect the Bank of England to keep rates on hold next week after Governor Andrew Bailey indicated that future decisions would be shaped by economic and geopolitical developments, pushing back against the notion that another rate hike is a foregone conclusion. Even so, markets are fully pricing in four BoE rate increases by mid-2027, as elevated oil prices continue to stoke inflation concerns. In the US, the dollar stayed supported by rising expectations of a Federal Reserve rate hike next Wednesday, following stronger-than-anticipated core inflation data and evidence of a resilient labor market.
