Sterling drops and UK bond yields rise amid Iran war
Sterling fell to $1.328 on Monday as investors moved to the dollar amid the Iran war. UK gilt yields hit 2008 highs as traders priced in four BoE rate hikes.
The British pound and government bonds faced significant pressure on Monday as geopolitical tensions involving Iran triggered a shift toward safe-haven assets. Despite expectations for aggressive interest rate hikes from the Bank of England, the United Kingdom currency struggled against a strengthening United States dollar as global markets reacted to the conflict.
The GBP/USD pair declined by 0.47% to reach $1.328. Simultaneously, the yield on 10-year British Gilts surged to 5.079%, marking the highest level for the benchmark bond since 2008. This rise in yields reflects market anticipation of an inflationary shock stemming from the ongoing conflict and the potential for four interest rate hikes by the central bank this year.
