GBP/USD Soars as UK Inflation Hits Four-Month High Amid Eased Bond Yields

The UK's inflation rate rose in line with expectations last month, reaching a four-month high. The Office for National Statistics reported that July inflation accelerated to 2.9% year-on-year and 0.3% month-on-month. This reflects the 13% rise in household energy bills, which was partially offset by cheaper motor fuel.

Services inflation, closely watched by the Bank of England, fell to 3.4% from 3.6%. The broader inflation outlook remains complicated by the Middle East conflict, putting upward pressure on oil, energy, and fertiliser prices. This could lead to another rate hike this year, but the softening labour market and tepid economy may limit its impact.

The UK pound rose against the US dollar as global bond yields eased from recent highs. Markets are now focused on the release of July FOMC minutes at 18:00 GMT, which could provide clues on how policymakers assess the inflation outlook and rising Treasury yields.