(Reuters) – The pound edged higher on Tuesday, breaking a three-day falling streak, as investors covered some of their short positions and as 10-year British government bond yields rose to their highest in more than seven years.
Against the U.S. dollar, the pound edged 0.1% higher to $1.3029 as UK 10-year government bond yields rose to the highest since December 2015 at 1.96%. [GB/]
But the outlook remained cautious, with the pound well within striking distance of a November 2020 low of $1.2973 hit last week.
Even as British yields have extended gains in recent days, investors have become increasingly unsure whether the Bank of England (BoE) will follow its global counterparts in raising interest rates aggressively to curb inflation.
Data last week showed British consumer price inflation jumping in March to 7%, its highest in three decades, but money markets have slightly dialled down expectations for how much the BoE will raise interest rates in the rest of the year.
Market focus is on a speech from BoE governor Andrew Bailey on Thursday, even as data showed hedge funds have increased their short bets on the pound to their highest levels since the start of the year.
Against the euro, the pound edged 0.1% higher to 82.94 pence.
(Reporting by Saikat Chatterjee Editing by Mark Potter)