Pound Slumps as Bond Yields Reach 19-Year High

The pound (GBP) came under pressure yesterday due to rising UK government borrowing costs, which reached their highest point since August 2007. The 10-year gilt yields stood at a 19-year high, weighing on Sterling's performance. Although the yields retreated from this peak, the pound continued to struggle for traction.

The UK's services PMI for August could provide some support for the pound today if it confirms that activity in the sector picked up pace last month. In contrast, the euro (EUR) experienced mixed performance against its counterparts due to a lack of significant Eurozone economic data. The common currency may find support if markets interpret upcoming producer price inflation data as evidence of mounting inflationary pressures.

The US dollar (USD) lost ground yesterday afternoon as improving market sentiment reduced demand for the safe-haven currency. The latest ADP employment change data also weighed on the 'greenback', with a weak 38,000 job increase in August marking its weakest growth since January.