FX.co ★ UK 10-Year Gilt Yield Rises to Over 5-Week High

The yield on the UK's 10-year gilt reached 4.729%, marking its highest point since April 11. Investors adjusted their outlook on potential Bank of England rate cuts in response to unexpectedly high inflation data. For April, the Consumer Price Index rose by 3.5% year-on-year, surpassing the 3.3% forecast and reaching the highest level since January 2024. Core inflation climbed to 3.8%, and services inflation jumped to 5.4%, significantly exceeding the 4.8% estimate. Monthly inflation also exceeded expectations at 1.2%. As a result, markets have now priced in merely 34 basis points of cuts for 2025, a decrease from the prior anticipation of two more rate reductions this year. Since the Bank of England's previous meeting, where most members supported a 25 basis point cut to 4.25%, investor anticipation for easing has steadily diminished. Looking forward, the focus shifts to the flash Purchasing Managers' Indexes (PMIs) due on Thursday, which are predicted to indicate a milder downturn in manufacturing and a less pronounced contraction in the services sector.