FX.co ★ UK 10-Year Gilt Yield Moves Down

The UK 10-year gilt yield eased to around 5.0%, tracking a decline in US Treasury yields as investors continued to monitor developments in the Middle East. While energy markets opened the week in relatively calm fashion, the risk of a prolonged conflict remains a key concern for the inflation outlook. Brent crude, although off its July peak, is still trading about 45% higher than at the start of the year.

The Bank of England left interest rates unchanged in July, with Governor Andrew Bailey reiterating that the disinflation process remains on track despite external risks. Market attention is now turning to this week’s UK inflation report, where consensus forecasts point to a rise in headline inflation to a four-month high, even as core inflation is expected to edge lower.

In the US, traders continue to pare back expectations of a Federal Reserve rate hike in September. Meanwhile, geopolitical tensions remain elevated after Iran urged Washington to “accept defeat,” and President Donald Trump warned that fuel prices are likely to stay high.