Financial expert predicts volatile times ahead on money markets

The pound surged to a two-and-a-half month high, while the FTSE 100 slumped to a nine-week low after Prime Minister Theresa May’s announcement.

The news sent sterling up more than 0.6% against the US dollar to trade at 1.264, recovering from a 0.3% drop just hours earlier and marking its highest level since the start of February.

Versus the euro, the pound jumped 0.5% to 1.186, rising from a 0.4% loss.

Sterling’s strength sent the FTSE 100 lower, dropping 1.6% or around 116 points to 7,210 points, its lowest level in more than nine weeks.

The FTSE 250, which hosts a wider range of domestically focused stocks, also fell 1% or about 195 points to 19,329 points.

Investors were digesting surprise news of the snap election.

Neil Wilson, senior market analyst at ETX Capital, said: “For investors, it adds another layer of complexity to an already uncertain picture for UK and European assets.

“Volatility is likely to remain elevated over the coming weeks. And as elections are so unpredictable, there is always the outside risk it could spark a reversal in the entire Brexit process.”

However, experts have pointed to polls which suggest the Conservatives will gain a stronger footing which will push forward the Brexit agenda.

Dean Turner, an economist at UBS Wealth Management, said: “We believe it is highly likely the Conservatives will increase their majority and firm up the future direction of Government policy, particularly in regard to Brexit.

“The Prime Minister has been softening her rhetoric on Brexit in recent weeks and we expect her to use this election to secure a mandate for future direction of the talks. Although disruption to the UK economy in the short-term is still likely, we believe that the longer-term outlook is brighter.”

For investors, it adds another layer of complexity to an already uncertain picture