Pound Falls Despite Rising Yields as BoE Meeting Looms

The British Pound has lost ground against the US Dollar this week, falling to its weakest level in three weeks. Despite rising gilt yields, which normally attract foreign investors, the pound's decline continues. The UK 10-year borrowing costs have risen above 5.20%, a 18-year high, but this has not translated into an increase in demand for sterling.

The upcoming September 17 meeting of the Monetary Policy Committee may exacerbate the situation as it will announce both interest rate decisions and the pace of gilt sales. This could further deter investors from buying UK bonds.

In contrast, the US Dollar has been buoyed by a strong private payrolls survey and rising energy costs, which have led to increased expectations of a Federal Reserve interest rate hike. The upcoming Beige Book may provide more insight into the state of the US economy.