The Pound Sterling (GBP) weakens against its major peers on Thursday due to a significant jump in the United Kingdom (UK) government’s borrowing costs.
The Pound Sterling faces severe selling pressure as a sharp spike in UK gilt yields mirrors a weak economic outlook. Fears of persistent UK inflation and Trump’s tariff hike plans have pushed UK bond yields to their highest levels since 1998. Renewed US inflation fears have forced Fed officials to turn cautious on interest rate cuts. The Pound Sterling weakens againstits major peers on Thursday due to a significant jump in the United Kingdom government’s borrowing costs.
Market participants expect that the US’s higher tariffs will boost demand for domestically produced goods and services, raising growth prospects, employment, and inflationary pressures. This scenario will force Federal Reserve policymakers to remain cautious on interest rates for longer, which will be USD-positive. Recent Fed minutes from the December meeting also hinted that the disinflation process has stalled temporarily, forcing policymakers to signal fewer interest rate cuts for this year.
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