UK: Elections call by PM May was a surprise for markets - BBH

The research team at BBH explains that the UK Prime Minister May surprised the global investors and world policymakers by calling snap elections as this is precisely what the 2011 electoral law sought to prevent by fixing the date of elections.  

Key Quotes

“As recently as right before the Easter break, May's office denied the persistent speculation that she would (or should) maneuver for early elections.  It is not an ethical or moral issue.  It is pure pragmatic realism.  The benefits of an election outweighed the costs and risks by a margin that could not be refused.  Bold decisions are often those that achieve many objectives and this is no exception.  The window of opportunity may not have been open for very long.”  

“There is the long-run strategic objective of ensuring that the conclusion of the Brexit negotiations are not held hostage by electoral politics and the previously scheduled election in 2020.  There is the opportunity offered by her popularity, which is helping to give the Tory Party more than a 20-point lead in the polls.  Labour's Corbyn is a vulnerable leader.  Labour is expected to be trounced in the May 4 elections, and there is some risk that the defeat forces Corbyn out.  Waiting too long could risk facing a stronger Labour Party.”

“UKIP appears to be faltering, losing to Labour in a special election in a district that voted in favor of Brexit.  Its sole member of parliament, Carswell, recently resigned to become an independent.  The Liberal Democrats are positioned to pick up a few seats from its current nine (especially in Southwest England), but the Tories can pick up many more seats from Labour (especially in Northern England and Midlands).  May will achieve her own mandate, which in turn strengthens her hand against both domestic rivals (within her party) and in negotiations with Europe.”

“There are risks associated with May's move.  To pull the end run around the 2011 electoral law, May needs the approval of Labour to secure the 2/3 votes needs.  Corbyn quickly handed May his noose, while the Lib-Dem's leader Farron also accept the gauntlet as he may be trying to position himself as the anti-Brexit leader.  If her motion were to fail, it would force the less desirable alternative of a vote of confidence that May must lose to win the election.”

“Sterling has been unable to extend yesterday’s gains.  Cable has backed off the $1.29 high from yesterday, while the EUR/GBP cross was unable to break below the .8300 low from December.  The euro has so far been unable to break above the $1.0740 area, which is the 50% retracement objective of the March-April drop.”