By Sara Sjolin, MarketWatch , Rachel Koning Beals

Dollar index down less than 0.1%

The pound gained Tuesday after the U.K.'s Theresa May called a surprise general election that she says is necessary to strengthen Brexit negotiations.

The pound recovered from an initial drop that accompanied news of a special, but initially unknown, announcement.

"This uncertainty has caused a reaction in the sterling," said Jameel Ahmad, vice president of market research at FXTM in a note. May had repeatedly denied she would call a snap election before the next planned vote in 2020.

Ultimately, the prime minister announced plans for an early general election (http://www.marketwatch.com/story/uk-leader-theresa-may-calls-snap-general-election-on-june-8-2017-04-18) on June 8 because other parties in parliament are opposed to the Conservative-led government's Brexit plans.

The pound hit $1.2583 as details emerged. It dropped to $1.2530 after trading as high as $1.2608 earlier on Tuesday. Against the euro, the pound traded at EUR1.1870; it had dropped to EUR1.1748.

"We want a deep and special partnership between a strong and successful European Union and a United Kingdom that is free to chart its own way in the world," May said. "Our opponents believe that because the Government's majority is so small, our resolve will weaken and that they can force us to change course. They are wrong," she added.

May's Conservative party currently has a parliamentary majority of 17. Since taking office last summer, the prime minister has consistently ruled out a snap election. As recently as last month, her office said an early vote was off the table and there wasn't going to be an election until the planned ballot in 2020.

"May wants to show that she has the ultimate power on this and she would like to sail the Brexit ship in a way that she likes to do," said Naeem Aslam, chief market analyst with Think Markets. "The process of general election would strengthen her hand."

"Sterling ... recovered all the losses while she was making her speech," he said. "The downward move confirmed that the there is a big support at 1.2550."

The dollar, meanwhile, slipped against leading rivals but was generally stabilizing from the deeper losses of recent sessions. The ICE U.S. Dollar Index slipped less than 0.1% at 100.23.

(END) Dow Jones Newswires

April 18, 2017 07:13 ET (11:13 GMT)

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