The Pound to Dollar (GBP/USD) exchange rate has steadied near 1.34 after suffering heavy losses earlier this month, although Rabobank believes Sterling remains vulnerable as UK political uncertainty continues to weigh on investor sentiment.

GBP/USD traded near 1.3427 on Thursday, recovering modestly after falling towards 1.33 earlier in May amid renewed concerns surrounding Prime Minister Keir Starmer’s leadership.

Rabobank analysts noted that Pound Sterling has been one of the weakest major currencies during May, describing the Pound as “the third worst performing G10 currency” over the past month.

The bank believes politics has become the dominant driver behind recent Sterling weakness.

“Most commentators would agree that the poor performance of the pound in May can be linked to political uncertainty sparked by the local elections at the start of the month.”

Rabobank warned that uncertainty may continue throughout the summer given speculation surrounding possible Labour leadership changes.

“It would appear very likely that political uncertainty will drag on through the summer.”

The bank said investors remain concerned that the UK could face another prolonged period of unstable government after several years of political turbulence.

“From the point of view of investors who desire clear policy direction, the Labour party has behaved as an unruly coalition.”

Rabobank also cautioned that markets may become increasingly uneasy over fiscal risks if Labour shifts further to the left politically.

“The favourites to win any Labour leadership challenge are Burnham and Rayner, both representing the soft left of the party.”

While Andy Burnham has attempted to reassure investors by backing existing fiscal rules, Rabobank argued markets may still worry about higher taxes and borrowing.

“While Burnham has recently allayed fears about unfunded spending with the reassurance that he will stick to the current Chancellor’s fiscal rules, this implies the potential for an even higher tax burden to support spending plans.”

The bank also believes ongoing Middle East tensions could continue supporting the US Dollar through safe-haven demand.

“We see scope for further dips in cable back to the GBP/USD1.33 level on a 1-month view.”

Rabobank expects UK political uncertainty to remain an important drag on Sterling during the second half of 2026.

Other Banks More Constructive on Sterling Outlook

Rabobank’s cautious Pound Sterling outlook contrasts with several other major investment banks.

RBC Capital Markets forecasts GBP/USD rising back towards 1.40 during 2027, while Westpac and Scotiabank also expect medium-term gains for Sterling. Natixis sees GBP/USD climbing gradually towards 1.39 by late 2027.

However, Citi and Danske Bank remain more cautious, warning that slowing UK growth and political instability could keep Sterling under pressure.

Rabobank believes Pound Sterling could remain vulnerable in coming months as political uncertainty and safe-haven US Dollar demand continue to overshadow support from UK interest-rate expectations.

• During the beginning of the trading session on Wednesday, we have seen a lot of Euro strength but have since rolled over to show signs of hesitation.

• We are sitting just above the 200-day EMA, and the 200-day EMA will continue to be very important. If we break down below there, then we could go challenging the 1.16 level.

To the upside, the 1.17 level is an area that I think we might try to get to if we get a little bit more bullish or risk appetite behavior jumping into the market. Keep in mind that interest rates in America are still pretty high and that does help the dollar, but at the same time, most of what we’re seeing here is a question as to whether or not things can get sorted out in the Middle East. If they can, that at least in theory should be good for the Euro because it might relieve some of the energy concerns in certain parts of it, like the industrial sector in Germany.

Consolidation and Market Noise

Ultimately, this is a market that I think continues to be very noisy, I think it continues to be very choppy, and I think it also continues to see a lot of questions as of where to go next.

The EUR/USD pair is basically in the middle of a larger consolidation area between the 1.14 level and the 1.1850 level, but the price action on Wednesday tells me that the market still favors the dollar in general. I’m not looking for massive moves, but I think short term rallies probably offer selling opportunities for short term moves. Nothing major here, not longer term, just the way the market has been behaving.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

Platinum price formed more of the bearish corrective trading, affected by providing negative momentum by the main indicators, reaching the initial target at $1865.00, which represents an extra support against the negative trading.

The suggested scenario depends on the strength of the current support, as holding above it will increase the chances of forming bullish waves, to attempt to reach $1960.00, to attack the moving average 55 at $2000.00, while the decline below the support and providing negative close will force it to suffer extra losses by reaching $1805.00 and $1775.00.

The expected trading range for today is between $1865.00 and $1950.00

Trend forecast: Bullish

• The Euro rallied a bit early during the trading session on Tuesday as we are above the 185 Yen level.

• The 185 Yen level is a large round psychologically significant figure that is also backed up by the 50-day EMA to offer support.

The EUR/JPY market is likely to go looking towards higher levels at this point. We continue to see buyers come in and try to take advantage of these dips. If we were to fall lower from here, then the 183.50 level would be an area that we need to watch as well.

Interest Rate Differentials and Central Bank Wiggle Room

All things being equal, keep in mind that the interest rate differential will favor the Euro, and of course, the Bank of Japan may have a little bit of wiggle room because inflation looks like it is slowing down in Japan. But at the same time, they did intervene a few weeks ago, so I think the upside might be somewhat protected as well.

I think maybe somewhere around the 187.50 Yen level you would have to be cautious because of the market memory there and the possibility that the Japanese get involved, although the real trigger would probably be how the US dollar is trading against the Yen.

But nonetheless, we have a situation where I think you’ve got some upside here, probably for several days once we break out, but it might be somewhat limited because of that previous action. Ultimately, I have no interest in shorting this market. I think we’ve got a situation where the buyers win out.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

• The British pound has fallen quite a bit during the early part of the session here on Tuesday, but as you can see, the market continues to see a lot of noise and quite frankly, a lot of questions asked about the British pound against the US dollar.

• Probably not so much in the realm of what’s wrong with the pound, it’s that there’s a lot of fear out there and that makes the dollar strong.

Keep in mind that we are in the midst of filling the gap from the Monday open. That makes sense because we keep getting a lot of back and forth when it comes to the United States and Iran. So, with this, I believe this is a market that may try to bounce from here. We’ll just have to watch the interest rates in both countries and of course, we’ll have to watch the headlines.

Support Levels and Risk Appetite

If the GBP/USD pair does break down from here a little bit, the 200-day EMA right at the 1.34 level makes sense as support. Below there, the 1.33 level makes sense as support as well. So, in other words, even if we do fall, I think there are buyers’ underneath that are willing to get involved and take advantage of cheap British pounds.

To the upside, the 1.36 level I think is your short-term target. Whether or not we can break above there remains to be seen. A lot of this will come down to risk appetite. Remember the US dollar, of course, is considered to be a safety currency and that, of course, is what I think a lot of people are looking at it as just a simple, possible safety play.

The noise will continue to be deafening and therefore I would expect to continue to see a lot of choppiness.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

• The US dollar has rallied a bit during the trading session on Tuesday as we continue to see a lot of upward pressure, and I think short-term pullbacks, I think, continue to attract a lot of attention mainly due to the fact that the interest rate differential is going to remain very wide between the United States and Japan.

That being said, you also have to be very cautious with the idea that the 160-yen level is an area where we had seen a lot of action due to the Bank of Japan getting involved. The 160 yen level is an area that I think a lot of people will have to pay close attention to, and the 160.50-yen level is an area that I think that is a massive barrier for the Bank of Japan to defend as it was a swing high going back to 1990.

Support Levels and Central Bank Intervention

Short-term pullbacks at this point open up the possibility of support underneath at the 50-day EMA as well as the 158-yen level. Anything below there opens up the possibility of a move down to the 156-yen level, but I don’t think that is very likely to be the case.

All things being equal, this is a market that I think you start to look for shorter term trades on drops in the dollar against the yen and that opens up the possibility of a little bit of value hunting as well as short-term opportunities. Ultimately, this is the market that I think does continue to threaten the Bank of Japan and now it’ll be interesting to see what the Japanese yen does because the Bank of Japan has recently received word that inflation is dropping in Japan and that could ease some of their concerns about a shrinking yen. That being said, there is a lot going on at the moment, not only in the Middle East but just around the world in general, so expect a lot of volatility.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

Exchange Rates UK Research’s latest May 2026 survey of major investment banks shows the EUR/USD exchange rate is expected to remain relatively well-supported above 1.16 in the near term, with the broader balance of forecasts continuing to point towards a gradual move into the 1.20–1.24 region through 2027.

The latest poll also highlights a growing divide between banks expecting a structurally weaker US dollar over the coming years and a smaller group forecasting EUR/USD drifting back towards the low-1.10s.

Latest Survey Suggests EUR/USD Recovery Trend Remains Intact

The majority of forecasts in the latest Exchange Rates UK Research poll continue to favour gradual EUR/USD appreciation over the medium term.

Banks including Scotiabank, RBC Capital Markets, ING, SEB and Natixis all expect the pair to trade above 1.20 during 2027, while Nordea remains the most bullish institution in the survey with projections extending towards 1.28 longer term.

By contrast, Citi and Danske Bank remain more cautious on the euro outlook, forecasting EUR/USD drifting back towards the 1.12–1.14 region over time.

Overall, however, the balance of forecasts continues to point towards a broadly softer US dollar environment compared with the past several years.

That outlook reflects the pair’s broader recovery trend since mid-2025.

EUR/USD rallied strongly from lows near 1.13 during 2025 and spent much of early 2026 trading in the 1.16–1.18 region. Although momentum has slowed during May, the pair remains significantly above the lows below parity seen during the 2022 energy crisis and the broader dollar surge that dominated 2022–2024.

Recent price action also suggests markets are becoming more comfortable with EUR/USD stabilising above the 1.15 level after repeated pullbacks found support.

Dollar Weakness Narrative Continues to Dominate Forecasts

A key theme running through the latest bank forecasts is the growing importance of the long-term US dollar outlook.

Many institutions now expect the Federal Reserve to gradually move towards lower interest rates during 2026 and 2027 as US growth slows and inflation pressures moderate further.

At the same time, concerns surrounding US fiscal deficits and rising government debt continue to feature prominently in longer-term dollar outlook discussions.

By comparison, the euro has benefited from improving Eurozone growth expectations, easing energy market pressures and reduced concerns about fragmentation risks within the currency bloc.

The European Central Bank has also maintained a relatively cautious approach towards rate cuts, helping support yield differentials versus the US dollar.

However, banks remain cautious about forecasting a rapid EUR/USD rally.

Global growth concerns, geopolitical tensions and periodic safe-haven demand for the US dollar continue to generate volatility and limit the pace of euro gains.

EUR/USD Outlook: Banks Increasingly Comfortable Forecasting Higher Euro-Dollar

The latest Exchange Rates UK Research survey suggests a growing number of banks now view EUR/USD strength as a medium-term structural trend rather than simply a short-term correction.

Importantly, most forecasts now cluster above the average trading ranges seen between 2022 and 2024, reinforcing the idea that the market may be entering a new phase of broader US dollar weakness.

For now, the survey points to gradual appreciation rather than an aggressive breakout higher.

But with markets increasingly focused on Federal Reserve easing expectations and longer-term fiscal risks in the United States, institutional sentiment towards EUR/USD remains notably more constructive than it was even a year ago.

Copper prices remained stable in recent trading, settled near $6.3500 level affected by its confinement between $6.4000 barrier, while $6.1000 level form extra support against the attempt of activating the bearish corrective trend.

Note that providing negative momentum signals by stochastic may push the price toward forming some bearish waves and attempting to attack the current support level. A break below this support would confirm readiness for further corrective waves, to target $5.9500 and $5.8000, while breaching the barrier and holding above it will turn it to the bullish path, to expect recording extra gains by its rally towards $6.6000.

The expected trading range for today is between $6.1000 and $6.4000

Trend forecast: Fluctuated within the bullish trend