UK Bond markets are sending a very different signal to the BOE- GBP/USD needs to listen

If you look across the UK bond (GILTS) markets right now you will see the 10 year yield has risen to around 4.77% today. Meantime, the Bank of England (BOE) is still attempting to pursue a monetary easing path. Of course the UK CPI data out today was very much a headwind for the Bank to continue on a loosening path. The odds of another rate cut in June have been pushed out since that data this morning and helped to drive yields further away from the current 4.25% base rate. So, given the level of UK yields right now should not the GBP/USD be running away on the topside more than it has so far today? Well, arguably yes it should, but there is another problem. Many in the markets now believe there could be some new measures on tax from the government next month and that would more usually imply a reduction in borrowing costs- that would actually benefit the consumer and the Treasury, with the current ballooning cost of funding the deficit. The risks to the economy of more tax hikes are significant though and that could one reason why the market is not really getting behind the currency, where more normally they might be right now. Remove that risk and underpin the prospect of further dollar falls and the Pound might yet fly, but not yet just it seems. The GBP/USD is right now at 1.3418