GBP/USD Slides as UK Gilt Yields Soar to 5.51%

The GBP/USD currency pair is experiencing a decline, trading at 1.3230 against the US dollar in the morning of the US session, down 0.26% from Wednesday's close. This move comes after a steady increase in UK 10-year gilt yields to their highest level since July 2007, reaching 5.51%, while 30-year gilts touched 6.03%, the highest since January 1998.

The Bank of England held its Bank Rate at 3.75% in a 6-3 vote, one day after the Fed raised interest rates. The decision set up a policy gap that is weighing on the pound, with sterling now facing a fiscal risk premium that higher yields cannot offset.

UK 10-year gilt yields are currently 23 basis points above US Treasuries and 195 basis points above German Bunds. This premium reflects investors' demand for compensation specifically for holding UK debt, separate from the global rate cycle. The pattern matters more than the level, as rising gilt yields typically strengthen the pound when expected to hike, but weaken it when driven by fiscal risk.

The near-term levels are clear, with support at 1.3210 and resistance at 1.3250. Below that, 1.3150 comes into view. The pound is unlikely to recover meaningfully until either US yields fall or the October Budget calms gilt markets.