Sterling strengthens as PM May calls election

It was an eventful start to the week to say the least as UK PM May effectively called an election for June 8 (parliament is expected to approve the election in a vote today). Sterling strengthened notably on the  announcement, rising to well over $1.28 against the dollar and to around 83.5p against the the euro

The reaction in the currency market seemed to be informed by current opinion polls, which show the outgoing conservative government would be returned with a much larger majority than now. Such an outcome is seen strengthening Theresa May’s hand in terms of the forthcoming negotiations with the EU while also making her less dependent for support from those in her party who favour a  ‘hard Brexit’

Elsewhere, the dollar weakened to over $1.07 against the euro and bond yields in the US continued to head south, with 10-year yields falling by 8bps to close at a 5-month low of 2.17%. German and UK yields ended the day about 3bps lower at 0.16% and 1.01% respectively

The IMF has raised its forecast for global growth in 2017 a touch to 3.5% (up 0.1pp from its January projection) and kept its forecast for 2018 unchanged at 3.6%.

Data due today include final CPI data for March in the Euro area. The flash reading showed the headline rate falling to 1.5% (from 2% in February) and the core rate dipping to 0.7% (from 0.9%)