GBP/USD Exchange Rate Stabilizes at 1.35 Amid Rising Bond Yields

The Pound to Dollar exchange rate has stabilized around 1.35 after touching three-week lows due to rising UK and US bond yields, which have raised concerns about fiscal sustainability on both sides of the Atlantic.

The UK's 10-year gilt yield hit a 19-year high above 5.20%, while the US 10-year bond yield spiked to 20-month highs above 4.80%. This has increased worries about fiscal policy and potential for a vicious cycle as rising yields further pressure on yields.

RBC Capital Markets believes that the Pound to Dollar exchange rate will slide to 1.27 by year-end, while MUFG predicts gains to 1.38 by early 2027.