Modified: Sunday, 10 May 2026 14:08 BST

– Written by


Ben Hughes

STORY LINK Pound Sterling to Dollar Forecast: GBP Holds Above 1.36 as Starmer Under Pressure

The Pound to Dollar (GBP/USD) exchange rate secured a net gain to 1.3625 on Friday amid a weaker US dollar while the Pound held firm in global markets.

Markets were reacting to the UK local election results and the potential implications for Prime Minister Starmer after heavy Labour losses increased pressure on his leadership.

There is still uncertainty over how much political risk has been priced into Sterling markets.

Friday’s US jobs report will also be a key element for the dollar.

GBP/USD Forecasts: Holding Near 1.136

Local election results released o Friday confirmed major Labour losses across England, Scotland and Wales, with Reform UK and the Greens making strong gains.

According to Danske Bank; “Gilt markets are sensitive to this outcome, as it could signal a shift towards a more lenient fiscal policy.”

Nick Rees, head of macro research at Monex Europe, still considers that there are Pound risks.

He stated; “No one wanted to be the leader who would wear the local election loss. That risk is out of the way now, so regardless of what happens, Starmer’s more vulnerable.”

He added; “Markets haven’t priced that in but they will at some point.”

As far as geo-politics are concerned, Iran stated that it was reviewing a US peace proposal that sources indicated would formally end the war but leave unresolved key US demands that Iran suspend its nuclear programme and reopen the Strait of Hormuz.

MUFG commented; “Overall, the latest developments add to investor confidence that the US and Iran continue to make progress to find a diplomatic solution to end the conflict and re-open the Strait.”

It added; “The improvement in global investor risk sentiment and drop in energy prices is providing a tailwind for emerging market currency performance.”

RBC Capital Markets head of global commodity strategy Helima Croft injected a note of caution.

According to Croft; “It remains far from clear that there is any material movement toward reopening the Strait, or if we are instead stuck in a rebranded ‘ceasefire with no oil’ purgatory.”

The dollar index was trading around 97.85.

ING noted that dollar moves have been correlated strongly with equity markets with a firm tone undermining any defensive dollar demand.

It added; “Any major further leg lower in the USD still requires a strong equity session, regardless of oil moves.”

According to the bank; “The strength in risk assets and more balanced positioning suggest that DXY can easily fall back below the 97.50 pre-war levels, even if oil prices settle significantly above February levels.”

Labour’s heavy local election losses have intensified speculation surrounding Starmer’s long-term position, although the Prime Minister has insisted he will remain in office despite mounting pressure from some MPs.

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TAGS: Pound Dollar Forecasts