Sterling shot up to a six-month high on Tuesday after Prime Minister Theresa May surprised markets by calling a snap General Election on 8 June.
May said this was the best time to call a General Election, as if she waited until the scheduled date in 2020 it would clash with the most difficult stage in the Brexit negotiations.
Despite early morning sterling volatility after May's office announced she would make a statement, the pound soared 2.37% to $1.290 after her speech, its highest level since October, while against the euro it rose 1% to €1.194, a four-month high.
Neil Hermon, UK equities manager at Henderson Global Investors, said: "We believe this news is more positive for the domestic mid caps than the international large caps because of a likely further strengthening of sterling and a more stable medium-term political environment in the UK."
However, following May's announcement, the FTSE 100 suffered its worst daily fall since the immediate aftermath of Brexit, down 2.5% to 7,148 points.
The index's performance was largely due to the strengthening of sterling as 70% of its stocks are dollar earners, meaning almost £46bn of value was lost on the UK's biggest blue chips, according to The Telegraph.
The FTSE 100's performance was further hindered by large falls in iron ore prices. As a result, mining companies such as BHP Billiton and Glencore were the worst performing stocks, declining 5.59% to £11.98 and 5.58% to 298.1p respectively.
Laith Khalaf senior analyst at Hargreaves Lansdown said: "The rising pound helped heap pressure on the UK stockmarket, which was already on the back foot thanks to declining iron ore prices hitting the resources sector.
"Of course the benchmark FTSE 100 is far from a pure barometer of the perceived health of the UK, given the global nature of the companies that constitute the index."