British pound rose slightly on Thursday, trading at $1.3455. However, the currency is experiencing its most volatile week in recent months and is poised for a third consecutive weekly loss. Against the euro, it traded flat at 86.67 pence.
UK 30-year bond yields briefly rose this week to their highest level since 1998. While high yields normally support the pound, this increase is putting pressure on the currency because it stems from inflation concerns.
Bank of England Governor Andrew Bailey said that interest rate cuts will continue, but the speed and timing are uncertain. While markets expect a definite cut at the September 18 meeting, the probability for November has fallen from 67% to 18%.
Experts predict that the pound peaked at 1.38 in July and will trade sideways below 1.35 in the short term. Finance Minister Rachel Reeves has pledged to keep spending under control before the autumn budget meeting on November 26.
Investor concerns persist: the UK has the highest borrowing costs among G7 countries. The 10-year GBP yield is 4.74%, compared to 4.2% in the US and only 1.6% in Japan.
