Weak GBPUSD reflects surging UK borrowing costs

Weak GBPUSD reflects surging UK borrowing costs

The GBPUSD has fallen to new yearly lows due to surging UK gilt yields, with the 10-year yield reaching its highest level since 2008 and the 30-year yield hitting 5.47%, a 25-year high. Rising UK inflation and fiscal uncertainty, driven by budget-related market jitters and domestic economic challenges, continue to weigh on both bonds and the currency.

The GBPUSD has fallen to levels last seen in November 2023, driven by surging UK borrowing costs. The yield on the UK 10-year gilt has surged to its highest level since the 2008 global financial crisis.

Although U.S. tariff policy announcements have had some influence, the rise in UK bond yields is largely attributed to domestic factors. Conservative MPs have pointed to Chancellor Rachel Reeves’ budget as a trigger, whereas Labour MPs blame the previous Conservative government for creating the challenges that necessitated Reeves’ tax increases.

Rising inflation, reversing its earlier downward trend since October, has further weighed on market sentiment. The upcoming release of UK inflation and GDP data next week will provide further insights.

Technically, GBPUSD remains in a bearish channel, with momentum potentially favoring a drop towards the 1.2067 support level.