GBP Defies Starmer Exit as Dollar Squeezes Euro, Yen

0.50% on the FTSE 100 and -3.4 basis points on the UK 10-year yield tell the story better than the resignation headline: traders are treating GBP rises despite Starmer resignation as a stability trade, not a panic trade.

The U.S. dollar opened the week mixed, higher against the euro and Japanese yen, but lower against sterling, according to Forexlive. At the same time, markets are leaning cautiously positive on the first round of U.S.-Iran talks in Switzerland, with oil lower, Gulf equities modestly higher, and U.S. stocks firmer as North American traders come in.

Political shocks, peace talks, and yield moves set the tone for markets

The connecting thread is simple: markets are separating political noise from tradable risk. Keir Starmer’s resignation is a major UK political shock, but sterling is holding near session highs. U.S.-Iran talks remain incomplete, but formal channels and a 60-day roadmap are enough to cool some geopolitical pressure.

That makes this a messy session, not a contradictory one. Traders are rewarding any sign of continuity while still respecting a firmer U.S. rates backdrop.

Sterling rises after Keir Starmer resigns and Labour turns to succession race

GBP rises despite Starmer resignation because the market appears focused on process, not drama. Starmer said he had "heard the message" from colleagues and will remain as caretaker prime minister until Labour chooses a new leader.

The pressure behind the move was political and internal. Forexlive cited growing pressure from within the Labour Party and a sharp decline in political support. The resignation also came one day after President Donald Trump posted on Truth Social that Starmer "will resign," while criticizing his policies on immigration and energy.

Starmer said he had "heard the message" from colleagues and will remain as caretaker prime minister until a new Labour leader is chosen.

Attention now turns to Andy Burnham, who is viewed as a leading contender to succeed him. XOOMAR analysis: markets may be reading the caretaker setup and leadership contest as a managed transition rather than an immediate governance break. That interpretation is supported by the UK market reaction: the pound is near highs, the FTSE 100 is higher in premarket trading, and the UK 10-year yield is lower.

Dollar gains against euro and yen while pound breaks from the pack

The dollar story is split. The USD is higher against the EUR and JPY, but lower against the GBP. That makes sterling the clean outlier in the currency market.

U.S. yields moved higher as the session developed. The 2-year Treasury yield was up 4.2 basis points at 4.221%, while the 10-year yield rose 4.3 basis points to 4.494%.

XOOMAR analysis: the rates screen gives traders a reason to avoid calling this a broad dollar selloff. The pound’s strength is specific to UK political repricing, while dollar gains against the euro and yen sit alongside higher U.S. yields. This is not one clean macro narrative. It’s politics, rates, and positioning colliding at the start of the week.

U.S.-Iran talks in Switzerland cool oil prices and lift Gulf market sentiment

The other big market driver came from Bürgenstock, Switzerland, where U.S. and Iranian negotiators wrapped up the first round of high-level talks. Both sides described the discussions as constructive and agreed to a 60-day roadmap toward a broader peace and security agreement.

Major differences remain. Still, the talks appeared to make more progress than many expected, according to the source material.

The most concrete confidence-building step was Iran agreeing in principle to allow UN nuclear inspectors back into its facilities. That matters because it gives markets something measurable to track beyond diplomatic language.

Oil reflected the shift. Crude oil futures were down $0.60, or -0.78%, while Gulf equities moved modestly higher. For broader context on the same pressure points, XOOMAR previously tracked how the Strait became central to negotiations in Hormuz Closure Turns US-Iran Talks Into Leverage Test and how Trump’s rhetoric raised the stakes in Trump Toll Threat Jolts Strait of Hormuz Iran Talks.

Lebanon deconfliction plan gives traders a concrete signal on regional risk

Negotiators also agreed to create a "deconfliction cell" for Lebanon. Its purpose is to reduce tensions involving Hezbollah and Israel and prevent renewed escalation in fighting.

The talks were not smooth. The source material cited reports of an Iranian walkout after Trump’s comments on the Strait of Hormuz, but negotiations resumed and ended with both sides agreeing to continue discussions.

That process matters for markets. A final agreement is not required for traders to mark down near-term escalation risk. Communication lines, inspection access, and deconfliction mechanisms can reduce the chance of a sudden shock that hits crude, shipping risk, and regional equities.

XOOMAR has also covered the Lebanon angle in Trump Corners Netanyahu as Lebanon Threatens Iran Deal, which fits the same pattern: regional flashpoints are now being priced through their effect on negotiation durability.

U.S. stocks open firmer as rising Treasury yields test the risk rally

U.S. equities were modestly higher as North American traders entered. The Dow industrial average was up 189 points, the S&P was up 15.92 points, and the Nasdaq was up 138 points.

That equity strength sits beside a less comfortable bond signal. The 2-year yield at 4.221% and the 10-year yield at 4.494% keep pressure on the risk rally, especially if yields continue to climb.

Oil’s decline gives the equity market some relief by pointing to a calmer geopolitical backdrop. But higher yields can still limit enthusiasm. The day’s trade is constructive, but not frictionless.

Alan Greenspan's death closes a chapter in modern central banking

Alan Greenspan has died at the age of 100, according to the source material. The news lands during a session dominated by yields, currencies, and the constant parsing of policy signals.

Greenspan’s market relevance is hard to separate from that habit. His long tenure shaped how traders listen to central bankers, read bond markets, and convert policy language into positioning.

The timing is striking. On a day when Treasury yields, sterling, and risk appetite are doing most of the talking, markets are also marking the death of one of the figures most associated with that style of monetary interpretation.

Bigger picture: Markets are rewarding stability signals, not clean storylines

GBP rises despite Starmer resignation looks less strange when viewed through the whole tape. Sterling can rise on political turnover if investors see a caretaker prime minister, a leadership process, and no immediate market stress in UK assets.

The same logic applies to the U.S.-Iran talks. There is no final peace agreement. Major differences remain. Yet oil eased and Gulf equities rose modestly because talks continued, a 60-day roadmap exists, and formal mechanisms are being put in place to avoid escalation.

The practical watch list is narrow. Labour’s leadership race will test whether sterling’s calm holds. The U.S.-Iran roadmap will show whether constructive talks become implementation. Treasury yields will decide whether the risk rally has room to extend or gets capped by rates.

Disclaimer: This XOOMAR analysis is for informational and educational purposes only. It is not financial, investment, legal, tax, or professional advice. It does not provide buy, sell, hold, price-target, portfolio, or personalized recommendations. Verify information independently and consult qualified professionals before making decisions.

The Bottom Line

• Sterling’s rise suggests traders see UK political transition as manageable rather than destabilizing.
• Lower oil prices point to easing geopolitical risk as U.S.-Iran talks continue.
• Rising U.S. yields keep pressure on risk assets even as equities and Gulf markets firm.

Originally published on XOOMAR. For more news and analysis, visit XOOMAR.