UK Elections May Put Vulnerable Pound on Same Path as Gilts

Investor worries over higher energy prices and elections that look to be disastrous for the government pushed the UK’s long-term borrowing costs to the highest level since 1998 this week. The pound wasn’t fazed.

The currency has largely withstood the one-two punch from war and political uncertainty, turning in the third-best performance among Group-of-10 peers since March. Along the way, the pound has benefited from investor expectations that it will be a source of solid returns in a scenario where the Middle East conflict stokes inflation and the Bank of England is forced to hike interest rates.