On a trade-weighted basis, sterling jumped 1 per cent to a four-month high of 78.8. Photograph: (Reuters)
Sterling jumped to as high as $1.2730, its strongest since December 14
Sterling surged by as much as 1.3 per cent against the dollar on Tuesday to hit its highest levels since mid-December, after British Prime Minister Theresa May surprised markets by calling an early parliamentary election for June.
The FTSE 100 suffered worst day since Brexit vote. The blue chip index ended the day down 2.46pc, a loss of 180.09 points, at 7,147.50. It marked its worst day since June 27 when the index plunged 2.55pc in the wake of the EU referendum.
Sterling jumped to as high as $1.2730, its strongest since Dec 14. It was on track for its biggest one-day rise since January.
Deutsche Bank, one the world's biggest sterling bears, said May's call for a general election was a "game-changer" for the currency, and that it would raise its forecasts for the pound in the coming days.
Analysts at the bank and elsewhere said May's move should result in a larger and more stable majority in parliament, thereby reducing the likelihood of a so-called "hard Brexit".
On a trade-weighted basis, sterling jumped 1 per cent to a four-month high of 78.8.