GBP/USD at 1.6340 Amid Outlook for Fed Tapering

U.K. government bonds fell for the first time in three days amid speculation the Federal Reserve will begin to reduce asset purchases as soon as this month, removing downward pressure on global borrowing costs.

Five-year yields climbed toward the highest level since September as the Debt Management Office sold 4.5 billion pounds ($7.36 billion) of the securities. German bunds and U.S. Treasuries also declined before the Fed holds its next policy meeting on Dec. 17-18. The pound dropped for a second day versus the dollar after rising to the strongest in more than two years earlier this week.

“For the next week or so we remain cautious on the market overall as the Fed meeting approaches,” said Sam Hill, a fixed-income strategist at Royal Bank of Canada in London. “Even though we don’t expect tapering to be announced in the December meeting, the market will be nervous about what the Fed’s statement will say given the recent better employment data.”


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