FX.co ★ UK 10-Year Gilts Slide Toward 4.9%

UK 10-year gilt yields drifted lower toward 4.9% at the close of a week overshadowed by weak economic data and ongoing uncertainty surrounding US-Iran peace talks. April retail sales fell 1.3%, nearly twice the expected 0.6% decline, weighed down by a sharp drop in fuel sales amid rising prices. At the same time, consumer confidence improved slightly in May, coming in ahead of forecasts. The UK’s budget deficit widened to £24.3 billion in April, exceeding the £20.9 billion projection and marking the largest April shortfall since 2020. These developments followed earlier releases showing softer-than-expected April inflation, an unexpected cooling in the labor market, and May PMI readings pointing to a contraction in private sector activity. Together, they complicate the Bank of England’s policy outlook at a time when markets are still pricing in two interest rate hikes this year. On the geopolitical front, US Senator Marco Rubio highlighted “some good signs” in negotiations with Iran, though Tehran’s enlarged uranium stockpile and its control over the Strait of Hormuz remain key sticking points.