FX.co ★ UK 10-Year Yield Holds Near One-Month Low

The yield on UK 10-year gilts rose to 4.5%, hovering near its lowest point in a month, having hit 4.476% on June 12. This increase was prompted by mounting tensions in the Middle East, prompting investors to seek safe-haven assets due to rising concerns over a potentially wider conflict. Israel conducted strikes on Iran’s nuclear facilities and targeted key figures overnight, citing the need to mitigate an existential threat. In retaliation, Iran launched multiple drones and hinted at further retaliatory measures. Economically, the UK's GDP experienced a sharper-than-anticipated contraction of 0.3% in April, as opposed to the forecasted 0.1% decline. This downturn was partly driven by a significant fall in exports to the US, attributed to the introduction of new tariffs. The combination of increasing economic stress and decreased labor demand, reflected in the recent employment data, has led to speculation that the Bank of England might consider more substantial interest rate cuts than previously anticipated.