FX.co ★ UK 10-Year Gilt Yield Rises to 6-Week High

The yield on the UK 10-year gilt climbed to 4.656%, marking its highest point in six weeks, following June's inflation figures surpassing expectations at 3.6% against a predicted 3.4%. This unexpected increase has prompted traders to slightly adjust their expectations regarding potential rate cuts by the Bank of England (BoE). Nonetheless, the market still anticipates an 80% likelihood of a 25 basis point cut in August, with an additional cut forecasted before the close of the year. Despite inflation exceeding the BoE’s target of 2%, much of this rise has been ascribed to alterations in energy price caps, which are anticipated to be temporary. The focus has now shifted to the UK labor market, as BoE officials emphasize employment market weaknesses as pivotal in shaping future policy choices. Policymakers have indicated their intent to overlook recent inflation spikes, considering them transient. Consequently, the upcoming job and wage statistics are poised to exert a significant influence on the BoE’s forthcoming decisions.