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Snap General Election is not without risk


Mike Amey, head of sterling portfolio management at PIMCO, comments on Theresa May’s decision to call a snap General Election on 8 June…

Theresa May's decision to call a snap election on 8 Juneis not without risk, but given a 20 point lead in the polls the Conservatives should be able to materially increase their working majority in Parliament. That in turn would give the government more room for manoeuvre during the Brexit negotiations, and make the government less exposed to the more right wing factions within the party.
 
All else equal that should lower the risk of a very disruptive Brexit as the government should be able to plot a less confrontational exit from the European Union. Whilst the initial market reaction has been muted this should reduce the risk premium in UK assets and put upwards pressure on UK gilt yields and potentially support the British Pound.

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