Pound Slumps Amid BoE Dovishness and Gilt Sell-Off

The British pound has been struggling to gain momentum in recent weeks, underperforming its G10 peers despite modest market movements.

The general sell-off in sovereign bonds is also affecting gilts, causing their yields to surge. The 30-year yield has broken past levels seen during the Liz Truss debacle in 2022 and reached a 28-year high last week.

The Bank of England's dovish stance is another factor hindering the pound's performance. Chief economist Pill expressed hawkish views, but they do not seem to be shared by the majority of the committee.

One positive factor supporting sterling is the upbeat tone of UK economic reports. Activity data has continued to surprise to the upside, despite cooling labour market conditions and higher borrowing costs.