LONDON, April 18 (Reuters) - Sterling inched higher while UK stocks hit a session low on Tuesday after British Prime Minister Theresa May shocked markets by calling a early parliamentary election for June 8.
May said in a statement outside her Downing Street office that the government had the right plan for negotiating the terms of Britain’s exit from the European Union, and that she needed political unity in London.
Sterling had earlier hit a three-week high of $1.2608 against a broadly weaker dollar before falling almost 1 cent after May’s office said she would be making a statement without indicating what it would concern.
After the BBC reported that May wanted an early election, sterling inched back up, and it rose to as high as $1.2593 after she confirmed the report in her statement. It was up 0.1 percent on the day at $1.2580 by 1020 GMT.
“For the moment at least it is not being seen particularly as a negative,” said Simon Derrick, head of the markets strategy team at Bank of New York Mellon in London.
“I guess people see that this may give Theresa May a better majority. It is a politically astute move and it should provide more stability going over the immediate aftermath of the exit from the EU.”
He added, however, that the uncertainty generated by the new vote was likely to prevent bigger gains for sterling in the month ahead and the FTSE 100 fell 1.2 percent on the day.
British government bond prices pared gains, causing the yield on 10-year gilts to rise by around a basis pont to 1.02 percent. (Reporting by Jemima Kelly, Patrick Graham, David Milliken and Helen Reid)