The U.K. currency is currently trading around $1.285, levels not seen since October.
While May’s announcement came as a surprise, many expect her Conservative party to win, according to Tom Stevenson, investment director for personal investing at Fidelity International.
“The prospect of a more secure parliamentary majority for the Government has lifted sterling and caused the FTSE 100 to fall. With five years before she needs to go back to the country, the Prime Minister’s hands are less tied than she would be facing a 2020 election,” he told CNBC via email.
“After the initial market reaction, markets will probably settle now with the electoral outcome already largely priced in. With this in mind, it’s sensible for investors to ignore the short-term noise created by the election and to focus on their longer-term goals.”
Economist Dean Turner and strategist Geoffrey Yu from UBS say the election will have a limited economic impact and believe sterling will stage a modest recovery over the next 12 months.
“We see no reason to change our view on markets. We still favor a diversified dividend strategy and are watching for any divergence between mid and large-cap performance should the GBP rally ahead of our expectations. We retain our six-month FTSE 100 forecast of 7550,” they said in a note published Tuesday.