Daily Analysis 18/05/2026

• GBP/USD Price: GBP/USD dropped toward the 1.3300 level during early European trading on Monday, marking its weakest point in more than five weeks before stabilizing near 1.3350. Sterling remains under pressure amid political uncertainty in the United Kingdom and cautious Bank of England commentary.
• UK Government: United Kingdom Deputy David Lammy David Lammy stated that UK PM Keir Starmer will not provide a timetable for leaving Downing Street, according to Sky News. The comments came amid growing political pressure following Labour’s weak election performance.
• Analysts outlook: Analysts at Jefferies said their base-case scenario is a “managed exit” for Starmer, with Andy Burnham viewed as a likely successor for prime minister. Continued political instability is negatively affecting confidence in the British Pound.
• BoE’s Breeden: Bank of England (BoE) Deputy Governor for Financial Stability, Sarah Breeden warned policymakers against being “trigger-happy” with interest rates. Her cautious stance reduced expectations of aggressive tightening by the Bank of England and failed to provide meaningful support for Sterling.
• UK data: Investors are now turning their attention to this week’s important UK labor-market releases, beginning with employment data scheduled for Tuesday. The figures could significantly influence expectations regarding future Bank of England policy decisions and near-term GBP/USD direction.

Closing statement: GBP/USD remains under pressure due to mounting UK political uncertainty and cautious Bank of England messaging. Upcoming UK employment data will likely play a key role in determining whether Sterling can stabilize after its recent sharp decline.

• XAU/USD Price: Gold prices staged a modest rebound after falling to the $4,480 region during the Asian session, the lowest level since March 30. Despite the recovery, upside momentum remains limited as investors continue favoring the US Dollar amid expectations of tighter US monetary policy.
• Middle East: Geopolitical risks increased after a drone strike reportedly caused a fire at the Barakah Nuclear Power Plant in the United Arab Emirates. The incident has renewed concerns about broader regional instability and potential disruptions to global energy markets.
• Iran-US negotiations: Iranian outlet Mehr News Agency reported that Washington offered “no tangible concessions” during negotiations. Iranian officials argued that the US was attempting to secure concessions it failed to achieve during the conflict, increasing the likelihood of stalled diplomatic talks.
• Indian gold: Gold discounts in India surged to record highs after the government increased gold import duties from 6% to 15%. The sharp tariff increase forced dealers to offer substantial discounts relative to official domestic prices, weakening local physical demand.
• Fed rate: According to the CME FedWatch Tool, markets now assign a 54.5% probability that the Federal Reserve will deliver at least one interest-rate hike this year. This marks a major shift from earlier expectations of rate cuts during the period of relative geopolitical calm and continues to pressure non-yielding assets such as gold.

Closing statement: Gold remains supported by geopolitical tensions in the Middle East, but stronger US Dollar demand and rising expectations for Federal Reserve tightening continue limiting upside potential. Market focus will remain on geopolitical developments and US inflation expectations for further direction.

• Crude Oil Price: West Texas Intermediate advanced for the third consecutive trading session, climbing toward the $101.80 level during Monday’s European session. Oil prices remain heavily supported by escalating geopolitical tensions in the Middle East and growing supply disruption fears.
• Dron attacks: Saudi Arabia announced that it intercepted three drones launched from Iraq and warned it would take all necessary operational measures to defend its sovereignty and national security. The incident heightened concerns about the potential spread of regional conflict across major oil-producing nations.
• Trump news: US President Donald Trump is reportedly preparing to meet with senior national security advisers to discuss possible military actions regarding Iran. The prospect of further escalation between the US, Israel, and Iran is increasing fears of prolonged instability around key global energy supply routes.
• Reuters outlook: According to Reuters, the ongoing conflict involving the US, Israel, and Iran has already cost global businesses approximately $25 billion due to rising oil and gas prices. Analysts expect those costs to increase further if supply-chain disruptions and shipping risks intensify.
• SPR refill: Energy Secretary Chris Wright stated that the Trump administration intends to fully replenish the Strategic Petroleum Reserve after the current emergency drawdown period ends. The commitment suggests the government remains focused on stabilizing long-term energy security despite near-term supply pressures.

Closing statement: WTI crude oil remains strongly supported by escalating geopolitical risks, supply concerns, and heightened military tensions in the Middle East. Continued uncertainty surrounding Iran and regional security could keep oil prices elevated and volatility high in the near term.

• DAX 40 Price: The DAX traded around 23,960 points during Monday’s session. German equities remained cautious as investors monitored geopolitical tensions in the Middle East alongside central bank commentary and corporate developments.
• Rheinmetall recovery: Rheinmetall shares rebounded by around 1.7% after recently falling to a one-year low near the €1,100 level. Investors appear to be selectively returning to defense stocks following heavy recent selling pressure.
• E.ON rating: Deutsche Bank reiterated its “Buy” rating on E.ON with a €20.50 price target. The positive analyst outlook renewed investor focus on Europe’s energy-transition and power-grid investment themes.
• Germany outlook: German Finance Minister Lars Klingbeil stated that the Group of Seven remains the appropriate forum for discussing efforts to end the Israel-Iran conflict. He also warned that instability surrounding the Strait of Hormuz represents a serious risk to the global economy and energy markets.
• Bundesbank’s Nagel: The head of the German Central Bank Joachim Nagel said central bankers can do “a lot more” to calm financial markets and restore positive momentum. His comments came ahead of a meeting involving G7 finance ministers and central bank officials in Paris.

Closing statement: The DAX remains pressured by geopolitical uncertainty and global market volatility, though selective strength in sectors such as utilities and defense is helping stabilize sentiment. Investors continue watching central bank signals and Middle East developments for further market direction.