British Pound sees more downside as US Yields rally further

The British Pound (GBP) experienced a slight decline, trading at 1.3225 against the US Dollar (USD) during Thursday's European session. US Treasury Yields have jumped, reaching a 19-year high of 5.15%, which has further strengthened the US Dollar. The US Dollar Index (DXY) rose 0.15% to 101.32, its highest level in eight weeks. The FedWatch tool indicates a 55% probability of a Federal Reserve rate hike in the remaining policy meetings this year, with board members warning of more interest rate hikes amid persistent high inflation.

The FXS Fed Sentiment Index dropped to 148.63, signifying a modest reduction in hawkish expectations. In contrast, the Bank of England (BoE) officials have a more cautious approach. Deputy Governor Clare Lombardelli maintains a hawkish stance, emphasizing the need for further rate hikes if energy prices persist and wage growth remains high.

However, BoE policymaker Swait Dhingra expressed a dovish sentiment, citing evidence of easing price pressures and a weak labor market. The GBP/USD pair is trading below the 20-period EMA, indicating a bearish near-term bias, and could potentially decline further towards the YTD low at 1.3140.