UPDATE 2-Sterling rises as Starmer pledges to stay on after Labour's local election losses

"Angela Rayner, clearly from ⁠the left ​of the party, ⁠would scare bond markets, as likely would Andy Burnham," he added, naming two Labour politicians often cited as ⁠potential challengers to Starmer. Gilts rose slightly on Friday with the 10-year yield down one basis point ​at 4.94%.

​Sterling climbed against the euro ​and the dollar on Friday after ‌local ​election results in Britain so far confirmed expectations of significant losses for the ruling Labour Party, but Prime Minister Keir ‌Starmer said he would not resign. Starmer’s Labour haemorrhaged support in areas reporting results overnight, with results still rolling inon Friday. Markets also remained focused on developments in the Middle East.

By Friday ‌morning, the pound was up 0.25% at $1.3583 , and was up 0.08% against ‌the euro, which traded at 86.45 pence. "We don't think any of the alternatives to Starmer are likely to be sterling positive," said Nick Rees, head of macro research at Monex Europe. "Angela Rayner, clearly from ⁠the left ​of the party, ⁠would scare bond markets, as likely would Andy Burnham," he added, naming two Labour politicians often cited as ⁠potential challengers to Starmer.

Gilts rose slightly on Friday with the 10-year yield down one basis point ​at 4.94%. The U.S. dollar index edged down on Friday after renewed hostilities broke ⁠out between the U.S. and Iran. U.S. President Donald Trump told reporters the ceasefire was still in ⁠effect. In ​the UK local elections, analysts argued on Thursday that a poor result by Labour was anticipated, while an immediate leadership challenge to Starmer was not priced ⁠yet.

"There have already been calls for him to set a timetable for handing over power," ⁠Mohit Kumar, an ⁠economist at Jefferies, said. "From a market's perspective, any replacement would be a left-leaning candidate and be fiscally negative," he added.