The yield on the UK 10-year gilt rose above 5.0%, its highest level since July 23, as renewed worries over the Iran conflict drove oil prices higher and intensified inflation concerns. The move came as part of a broader global bond selloff, though the rise in UK yields was capped by evidence of a cooling labour market, which could ease pressure on the Bank of England to tighten policy further.
Unemployment unexpectedly held at 4.9% in the three months to June, above the 4.8% consensus forecast, while payroll employment declined by 86,000 year-on-year. Regular pay growth came in at 3.5%, slightly stronger than expected. Taken together, the data support expectations that the BoE may leave interest rates unchanged for the rest of the year, following its decision to hold policy steady in July.
Investors are now focused on the upcoming UK inflation report, which is anticipated to show headline inflation rising to a four-month high, even as underlying price pressures are expected to ease.
