FX.co ★ UK Gilt Yields Jump as Energy Surge Fuels Inflation Fears

The UK 10-year gilt yield rose to 4.77%, nearing last week’s six-month high, as surging energy prices stoked inflation concerns ahead of the Bank of England’s interest rate decision. A 25% spike in European gas prices, driven by attacks on Qatar’s LNG facilities, alongside Brent crude trading at $114 per barrel, has increased pressure on the UK economy. Although the BoE is widely expected to keep rates on hold today, markets have turned more hawkish, with 32 basis points of additional tightening priced in by year-end—slightly more than a quarter-point hike. Traders now assign better than even odds to a rate increase in June, with a full hike fully priced in by September. At the same time, UK labour market data revealed slower wage growth and an unemployment rate steady at 5.2%, with both figures falling short of expectations.