GBP: May’s early elections call lit a fire under sterling - BBH

In view of the analysts at BBH, UK Prime Minister May's call to early elections lit a fire under sterling and it was the star performer, gaining nearly 2.2% against the dollar, the most since early November.  

Key Quotes

“Sterling had wind to its back before May's surprise.  It has advanced in five of the past six week.  In the three sessions since the announcement, sterling consolidated in about a cent range ($1.2760-$1.2860).  There is little doubt that May will have a stronger majority after the June 8 election.  She will likely be in a better negotiating position vis a vis her domestic rivals and EU negotiators.  It increases the chances that an agreement will be struck.” 

“We read the technical indicators as suggesting there is scope for addition gains, but suspect the $1.3000-$1.3050 may be difficult to overcome.  The surge in sterling lifted it above the top of the Bollinger Band, but that band is widening, allowing sterling to move back into it.  After the disappointing March retail sales, sterling slipped to meet the 38.2% retracement of the election bounce, which corresponds to the five-day moving average.  The 50% retracement is found at $1.2710. Meanwhile, despite some hawkish talk from the BOE's Saunders, the implied yield of the of the December short sterling futures edged lower for the fourth consecutive week.”