Sterling rises as local election results show Labour losses, gilts edge up

May 8 (Reuters) - ​Sterling climbed ⁠against the euro and the dollar ​on Friday after local election results in the UK so far confirmed expectations of ​significant ‌Labour losses, with investors turning their attention to the outlook for British Prime Minister ⁠Keir Starmer.

Starmer’s Labour party haemorrhaged support in ⁠areas reporting results overnight, with results ​still rolling inon Friday.

Markets also remained focused on developments in the Middle East.

The U.S. dollar index edged down against most major currencies 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 but it was not clear whether there would be an ‌immediate leadership challenge to the Prime Minister.

"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.

Gilts rose slightly with the 10-year yield down 2.5 basis points at 4.92%.

Some Labour lawmakers have said that if the party fails ⁠to hold ⁠many of the roughly 2,500 council seats it ‌is defending in England then Starmer will face renewed pressure to quit or at least set ​out a ​timetable for his departure.

However, British defence minister John ‌Healey said Starmer can still turn things around, when he was asked if the prime minister should set a timetable for his departure.