April 18, 2017 / 1:18 PM / a year ago

Deutsche Bank says UK election call a 'game-changer' for sterling

LONDON (Reuters) - 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.

The headquarters of Germany's Deutsche Bank is seen in Frankfurt, Germany, September 29, 2016. REUTERS/Kai Pfaffenbach

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

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