The GBP/USD pair has recently shown strong volatility but has struggled to determine its direction. Buyers and sellers alternately seize the initiative, reacting to the rapidly changing news backdrop. Over nearly three weeks in May, the pair traded within a wide range: buyers pushed the price to a three-month high at 1.3656, while sellers drove it to a five-week low at 1.3301.
At the center of attention are geopolitics, the UK's political crisis, and key macroeconomic reports. These factors resemble the "swans, crabs, and pikes" that pull GBP/USD in opposite directions.
Let's start with the domestic political events in Britain. Against the backdrop of disappointing local election results for the ruling Labour Party, discussions about a potential change in party leadership (and, consequently, the Prime Minister), Keir Starmer, have intensified in the UK. The situation was further fueled by Andy Burnham's candidacy for a parliamentary by-election. The Mayor of Greater Manchester is considered one of the main contenders for the new party leader. Monday's YouGov poll results showed that 47% of Labour members prefer to see Burnham at the helm of the party. Market participants perceived this information as a threat to the stability of budgetary policy, after which the GBP/USD pair declined to the base of the 33rd figure.
The thing is, Burnham is associated with a more left-wing, "spending" approach to economic policy. He is seen as a politician who traditionally supports the expansion of government spending (especially in social and healthcare sectors), more active redistribution, and a less stringent adherence to fiscal constraints. Naturally, traders view such a course as a risk factor for increasing budget deficits, rising issuance of government debt, and heightened pressure on yields.
However, on Monday, Burnham publicly reassured the markets that, should he come to power, he would not reconsider the limits on government borrowing. According to him, the existing budget rules will remain in place, and defense spending will not exceed the established limits.
Such "soothing" rhetoric provoked strong volatility in the GBP/USD pair—within just a few hours, the price rose by more than 100 pips.
Additional support for buyers was provided by recent geopolitical events. On Monday, reports emerged that Washington was willing to discuss a temporary easing of sanctions as part of negotiations with Tehran. These reassuring rumors reduced geopolitical tensions, putting the dollar under pressure across markets. This included the pair with the pound, allowing GBP/USD buyers to test the 34th figure.
However, on Tuesday, the GBP/USD pair turned south amid a rather weak UK labor market report. The release was contradictory; however, traders interpreted it unequivocally as bearish for the British currency. This conclusion seems quite justified, as despite the mixed nature of the data, the "glass is half empty" in this case, not the other way around.
Thus, the official unemployment rate in the UK for the three-month period ending in March 2026 rose to 5.0%, after a decrease to 4.9% in the previous reporting period. Most analysts had expected the figure to remain the same.
A substantial decline in the number of employees on payrolls was also recorded (by almost 100,000). This is one of the largest drops in recent years (excluding the coronavirus crisis).
At the same time, the total number of job vacancies fell to 705,000 for the period from February to April of this year. This is the lowest level for this indicator in the past five years (since spring 2021). Compared to the previous three-month period, the figure decreased by 3.9%. Year over year, it dropped by as much as 7.1%. The decline in vacancies was observed in 11 of the 18 sectors of the economy, with retail trade being hit the hardest. It should be noted that this component of the report serves as a kind of "harbinger." That is, it is a leading indicator that businesses are factoring in the risks of stagnation and freezing new hiring.
The number of claims for unemployment benefits rose by 26,500 in April, following an increase of 4,900 in the previous month. This marks the strongest growth dynamics since 2023. In conjunction with the decline in employment and rising unemployment, this figure signals that the UK labor market is entering a gradual cooling phase.
The wage growth rate (excluding bonuses) slowed to 3.4%, the lowest level since 2020. Adjusted for inflation, this indicates actual stagnation in real incomes.
Thus, a contradictory fundamental background has formed for the GBP/USD pair. On the one hand, there are glimmers of hope regarding the resolution of the Middle Eastern conflict; on the other hand, there are dismal labor-market data from the UK. Buyers were unable to establish themselves within the 34th figure (indicating the unreliability of long positions), but considering short positions is only prudent when sellers manage to hold below the support level of 1.3380—at this price point, the average line of Bollinger Bands on the H4 timeframe coincides with the Tenkan-sen line. Despite the prevailing bearish sentiment on Tuesday in the GBP/USD pair, sellers have yet to overcome this barrier. If bears do manage to push below this level, the next target for the downward movement will be the 1.3310 mark (the lower boundary of the Kumo cloud on the D1 timeframe).