The pound's rally faces a "government bond bottleneck" as the double-edged effect of energy inflation becomes evident

According to Golden Ten Data on March 6, Chris Turner from ING stated that the rally of the pound against the euro is unlikely to continue further, as rising energy prices could negatively impact UK government bonds. As energy prices rise and the market reduces expectations for Bank of England rate cuts, short-term interest rates for the pound are increasing. However, Turner pointed out that this could cause trouble for the UK government bond market, where investors are currently overweight. He stated that while the pound is enjoying short-term benefits from high interest rates, there is a risk of bond market turmoil triggered by energy price shocks. In this scenario, UK government bonds may once again drag the pound to lower levels in the coming weeks.