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Surprise announcement by Theresa May

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Theresa May called election in June

Theresa May called a general election for 8 June. To describe this as unexpected would be an understatement. The inevitable leak, an hour ahead of her appearance, sent the pound a cent lower: the subsequent and presumably more thoughtful reaction of investors was to send it all the way back up, and more.

At this stage the opinion polls give Mrs May's party a big lead that points to a healthy majority for the Conservatives. In turn, that implies an improved ability to get legislation - and we're talking Brexit legislation here - through parliament. Be they Brexiteers or Bremoaners, investors like the idea of a strong government.

Keeping calm

In the light of everything that has been going on in the last few days perhaps the biggest surprise is that the Japanese yen has not been more popular among investors. Granted, it took second place behind the recovering South African rand but its gain of just 0.3%, a third of a yen, did not at all smack of investors taking cover.

And there was plenty to concern them, especially with regard to Washington. The US president warned that North Korea was "looking for trouble" if it persisted with nuclear bombs and missile tests. He demonstrated his commitment by sending several naval ships into the area, which he inauspiciously described as an armada. North Korea retorted with a threat to launch a pre-emptive strike against America if Mr Trump continued to be provocative. Then America dropped the Mother Of All Bombs on Afghanistan. When it suits them, investors have a remarkable capacity to ignore stuff.

Slightly dubious data

Another way they demonstrated this was in their Nelsonian view of the UK economic data. Inflation fell short of forecast and jobseeker numbers unexpectedly increased by 26,500 in March. The market's take on those numbers was sanguine: Slightly sub-par inflation will not affect the Bank of England's monetary policy and the average earnings component of the employment data came in at 2.3%, exactly in line with the headline rate of inflation. That does mean that wages are only just keeping pace with prices but at least they are not being left behind, as had been feared.

Again on Friday investors were not troubled by a shortfall in US inflation - prices fell by -0.3% in March - or by a -0.2% decline in retail sales. There, too, the numbers will probably not divert the Federal Reserve from its push towards higher interest rates.

The pound just managed to get onto the podium in third, with an average rise of 0.2%. At the back of the field the North American dollars lost -1.2% each, one and a half US cents, while the euro and the Swiss franc were down by four fifths of a cent.

Eurozone

Christine Lagarde, the head of the International Monetary Fund, does not relish the prospect of the far-right Marine Le Pen and the far-left Jean-Luc Mélenchon making it through to the second round of the French presidential election after this weekend's first vote. That outcome is theoretically possible and Mme Lagarde says it casts "a huge question mark" over the euro zone.

The opinion polls point to a run-off between Emmanuel Macron (24%) and Mme Le Pen (23%). M. Macron has no ambitions to leave either the euro or the EU and the French people would be unlikely to support Mme Le Pen in any referendum on the matter.

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