Investors think the election means a softer Brexit –are they right?

Theresa May may have won herself room to compromise on the UK's exit from the EU - but don't get too carried away

Ignore the 180-point fall in the FTSE 100 index. Part of the decline occurred before the lectern had even been placed in Downing Street. Part of the rest can be explained by a stronger pound, which tends to depresses the value of the many big dollar-earners in the index. The real question is why sterling, which hit a six-month high, reacted so strongly to an early general election.

It was because investors calculated - counter-intuitively at first glance - that a bigger Tory majority in the Commons, if that's what follows, will mean a softer form of Brexit. This argument was best expressed by Deutsche Bank's analysts, who reckon the election is "a game-changer" for the pound and the Brexit negotiations. A bigger majority would set Theresa May free from the "unrealistic timetable" set by the eurosceptics in her party, they argue.

Related: FTSE 100 suffers worst day since Brexit vote after May calls election