Why is the GBP Selling Off?

The GBP/USD pair has seen a significant drop, plunging to 1.2191, a level last witnessed in November 2023. This decline comes despite rising UK bond yields, with the 30-year yield reaching 5.47% and the 10-year yield at 4.8%, both historic highs not seen in decades. Typically, such yields would support the pound; however, lingering fears of inflation and fiscal instability have outweighed this effect. The UK faces economic challenges, including increased borrowing costs and fiscal constraints under Chancellor Rachel Reeves' leadership. Meanwhile, the US dollar continues to gain momentum, driven by strong economic indicators and rising Treasury yields. As traders monitor the unfolding fiscal policies in the UK and any shifts in US trade strategies, the GBP/USD pair is likely to remain volatile. Keep an eye on these developments, as they will be key drivers in determining future price action in this currency pair.