Pound Falls as US Data Overshadows Bank of England's Steady Course

The pound fell and gilt yields rose as stronger U.S. employment data bolstered the dollar, outweighing the Bank of England's unchanged rates and slowed bond sales. Analysts noted the UK's stagflation and upcoming Autumn Budget as crucial for future economic directions.

The British pound experienced a decline on Thursday as gilt yields saw an uptick, highlighting the market's response to robust U.S. employment data that strengthened the dollar more than the Bank of England's decision to maintain steady interest rates and slow its bond sale pace.

Economists suggest that the UK's increasingly stagflationary landscape, marked by high inflation and weak economic growth, amplifies the importance of the upcoming Autumn Budget. Finance Minister Rachel Reeves faces pressure in maintaining financial stability amidst volatile bond market conditions.

The Bank of England's strategy, including selling off bonds acquired post-2008 financial crisis, continues to be a contentious approach among global central banks, which typically allow bonds to mature. Market observers remain cautious about the UK's long-term inflation trajectory, forecasting that the BoE must remain vigilant.

(With inputs from agencies.)