BUZZ-COMMENT-The path higher for sterling

Sterling firmed back toward the top of its recent elevated range on Tuesday and could head higher still as falling Treasury yields undermine the dollar.

GBP/USD was hovering near Monday's 2-month high by 1.2690 as the steady drive lower in U.S. 10-year Treasury yields -- which appear at risk of hitting 4% after touching a low of 4.32% in early NorAm -- continued.

For currencies, falling U.S. yields diminish the sting of a looming March 4 tariff deadline. The move also comes in sharp contrast to fears a month ago of a 5% yield.

The bull flattening U.S. yield curve has helped sterling by removing some of the interest rate premium from the dollar. In the case of GBP/USD, UK gilt rates have also followed U.S. yields lower, easing fiscal concerns that had been looming over Britain's economy.

Amid the current Trump trade unwind, U.S. and UK 5- and 10-year yields are 50bp lower, near December 2024 levels which saw GBP/USD trade near 1.28. Should yields continue their descent, GBP/USD is likely to regain 1.30, and perhaps make a run at September highs near 1.34.

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