Sterling wobbles, shares fall as snap UK election called

Sterling wobbled and UK and Irish stock benchmarks fell on Monday morning after UK prime minister Theresa May announced a snap election to take place in June, arguing it is the only way to secure stability ahead of Brexit.

Sterling fell from 0.845p against the euro to 0.851p after the leader of the UK’s Conservative Party made the announcement outside No 10 Downing Street at around 11am, before recovering the ground again within minutes. The reaction was similar in sterling trading against the US dollar.

However, the FTSE extended its losses to fall by as much as 1.3 per cent to 7,234 as investors digested the news, while the Iseq index in Dublin dipped by 0.3 per cent.

“The Conservatives are currently around 20 percentage points ahead of Labour in the opinion polls, so the election would very likely see an increased Tory majority, in turn increasing the likelihood of Brexit, according to Mrs May’s plans,” said Chris Hare, an economist with Investec in London.

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“Although leaving the [European] single market is priced in, one possible upside for sterling markets is the notion of Brexit taking place with less opposition/less confusion. But clearly, it is early days and the looming vote could well cause market volatility in the weeks to come.”

News of the UK election has added to European markets volatility on Tuesday, as investors also monitor the standoff over North Korea’s nuclear weapons programme and the first-round vote this weekend in the French presidential election.