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GBP/USD rises amid a weaker US dollar and as the UK heads to the polls. Oil (WTI) falls towards $90 a barrel on US-Iran peace hopes.
GBP/USD is rising above 1.36 amid US dollar weakness and as attention turns to today’s UK local elections.
The pound is finding support on Thursday amid improved market sentiment on hopes of a US-Iran breakthrough. However, investors will also be watching the results of the local elections taking place in the UK today.
UK voters head to the polls to choose representatives across 136 local authorities in England, as well as the Scottish and Welsh parliaments. All signs are pointing to a significant setback for the governing Labour Party. If these expectations are confirmed, this could result in a fresh round of political uncertainty for the UK.
Prime Minister Keir Starmer is already under pressure, and weak election results could see both the Prime Minister and Chancellor Rachel Reeves pushed out of their jobs. This could potentially open the door to a more left-leaning replacement, such as Andy Burnham, who may be more inclined to ramp up spending at a time when there are already concerns over UK debt sustainability and a fragile fiscal position.
UK gilt yields rose to multi-decade highs earlier this week but have eased lower in recent days as oil prices have dropped sharply. However, weak performance from Labour and signs that the Prime Minister could be pushed out may see gilt yields rise again, bringing sterling under pressure.
The USD is trading lower versus its major peers amid safe-haven outflows, as hopes grow for a U.S.-Iran deal to end the war in the Middle East and reopen the Strait of Hormuz. Oil is trading at $100 a barrel.
Attention will remain on developments in the Middle East, but will also turn to US jobless claims data due ahead of tomorrow’s non-farm payroll report. Expectations are for 60,000 jobs to be added in April, down from 178,000 in March, while unemployment is expected to hold steady at 4.3%.
GBP/USD recovered from the 1.32 support zone, rising above the 50 and 200 SMAs to a peak of 1.3650 before easing back. The price has once again recovered above 1.36, which, combined with the RSI above 50, keeps buyers hopeful of further gains.
Buyers will look for a move above 1.3650 to create a higher high and push towards 1.37 (a round number) and 1.38, before bringing 1.3870 (the 2026 high) into focus.
On the downside, a break below 1.36 opens the door to support at 1.3450, the late-April low, and below here exposes the 200 SMA at 1.3410.
WTI is falling below 93 on Thursday amid optimism over a peace deal to end the conflict with Iran.
The two sides are reportedly working on a preliminary framework for a deal to end the war and lay the groundwork for broader nuclear negotiations. President Trump hailed good progress in talks with Iran over the past 24 hours, although there is no deadline for when he expects to hear back from Tehran.
Hopes of a potential agreement with Iran to end the war and reopen the Strait of Hormuz have raised expectations of improved supply flows, pulling WTI and Brent lower.
Meanwhile, US crude oil inventory data showed that crude stockpiles in the US declined by 2.3 million barrels in the week ending May 1, adding to a fall of 6.2 million barrels in the previous week.
According to Goldman Sachs, global oil inventories are approaching their lowest level in the last eight years. The bank warned that the rapid decline in reserves is becoming a critical factor against the backdrop of limited supplies.
Looking ahead, attention will remain firmly on developments between the US and Iran. Any signs of a deal being agreed and the Strait reopening could see oil prices ease lower.
Oil’s recovery from the 79 low ran into resistance at 111, and the price turned lower, breaking below $100 a barrel and currently testing the 50 SMA at 93.50.
Sellers will need to break below this level to open the door to a more bearish bias, bringing 88 — the 50% Fibonacci retracement of the move from the 55 low to the 120 high — into focus ahead of 80.
Should the 50 SMA hold, buyers will look for a move back above 95, the 38.2% Fibonacci retracement, before targeting $100 a barrel and 105, the 23.6% Fibonacci retracement. However, it would take a move above 111 to create a higher high.