LONDON Deutsche Bank, one the world's biggest sterling bears, said on Tuesday that UK Prime Minister Theresa May's surprise call for a general election is a "game-changer" for the currency, and that it will raise its forecasts for the pound in the coming days.
May's move should result in a larger and more stable majority in parliament, thereby reducing the likelihood of a so-called 'hard Brexit', the bank's currency analysts said.
"We have been structurally negative on sterling for the last two years but are now changing view. This morning's announcement of a snap general election on June 8 is a game-changer for both the UK's Brexit negotiations and sterling," they said.
May's announcement paves the way for a lengthier negotiating process with the rest of the European Union, which is more in line with the EU approach, they said.
Sterling rose sharply on Tuesday, hitting a 2016 high of $1.2725.
As recently as March 23, Deutsche Bank analysts reiterated their call for a fall to $1.06 by the end of this year.
(Reporting by Jamie McGeever; Editing by Nigel Stephenson)