FX.co ★ UK 10-Year Gilt Yield Falls from 4-Month High

The UK 10-year gilt yield fell 10 bps to 4.49%, retreating from a near four-month high of 4.59% in the previous session, as investors became more confident that the conflict would have a smaller impact on inflation than initially feared, tempering expectations of further interest-rate hikes. Sentiment improved as oil prices eased following comments from US President Donald Trump intended to reassure markets. Trump suggested the conflict could be resolved quickly and said the US Navy would escort tankers through the Strait of Hormuz. The resulting decline in oil and European natural gas prices reduced pressure on energy markets and helped to alleviate inflation concerns. In turn, expectations for Bank of England policy shifted again, with traders moving back toward the prospect of rate cuts. Markets are now pricing in roughly a 50% probability of a rate cut by September, a sharp reversal from the previous session, when policy was expected to remain broadly unchanged and a rate hike had briefly been priced in earlier in the day.