Pound faces largest three-day drop in nearly two years as gilt yields surge

The pound is experiencing its largest three-day decline in nearly two years, dropping 0.9% to $1.226. This decline follows a significant sell-off in global bonds, particularly affecting UK gilts, which have reached their highest yields in 16.5 years. Concerns about rising inflation and uncertainty regarding the incoming U.S. administration's policies have contributed to this situation. The UK market has been particularly impacted, with 10-year gilt yields rising sharply, reflecting worries about Britain's fiscal health. Despite higher gilt yields typically supporting the pound, this trend has reversed due to investor concerns. The UK finance ministry reaffirmed its commitment to fiscal rules, while expectations for interest rate changes remain similar for both the Bank of England and the Federal Reserve.