Theresa May’s surprise general election announcement sparked a surge in the pound and UK blue-chip shares suffered their biggest one-day decline since the country voted to leave the EU.
The pound climbed as much as 1.6 per cent to a five-month high of $1.2772 on Tuesday, breaking through a long-term downward trend for the first time since the vote for Brexit as investors bet the prime minister would use the vote to neutralise Tory Eurosceptics and deliver a soft Brexit.
“Not only does this neutralise Labour and the SNP, but it means she can negotiate a Brexit deal along the lines of what she wishes for, rather than having to appease the hardliners in her own party,” said David Owen, chief European financial economist at Jefferies. “She is now in a position to neutralise them as a threat.”