Sterling has seen quite a rebound after U.K. Prime Minister Theresa May surprised markets on Tuesday by announcing early elections. The currency surged to a six-and-a-half month high against the dollar on Tuesday trading around $1.28 levels. While sterling has been driven higher on growing optimism that Prime Minister May will win convincingly, a number of analysts have warned the rally won't last. "The market reaction is very rational given the response that we received. I think the fact that we are going to see a snap election, and we, and most other people expect the Conservatives to come back with a bigger majority," Mike Amey, a managing director and portfolio manager at Pimco, told CNBC Wednesday.

An employee manually counts 20 sterling pound notes in this arranged photograph at a Travelex store in London, United Kingdom, on March 6, 2013. Simon Dawson | Bloomberg | Getty Images

Amey further explained that this takes the pressure off May's Conservative party in March 2019 in the run up to fresh elections as the U.K. exits the EU. "I think the fact that sterling is up and gilts underperformed is fine. I think we look at where the markets are now and we think there is maybe a two-way risk on sterling, and U.K. bond yields look pretty low to us."

Surprising market reaction

However, some analysts say they were rather surprised with the market reaction on Tuesday after May's announcement. Kallum Pickering, senior UK economist at Berenberg, told CNBC via email that he was surprised at the positive market reaction. "I don't see much merit to the story that an increase in Conservative seats following 8 June election May will dilute the hard- Brexiteers on the Conservative backbenches, enabling May to go for the softer Brexit that she wanted all along." Pickering also said that the event yesterday has had no impact on the bank's sterling forecasts. "No major change to my sterling forecast. Part dollar story, part Brexit story; markets pricing in 2018 Fed rate hikes and the potential for early clashes in the Brexit negotiations suggests that sterling will head a little lower from here for the rest of the year." Sterling has seen a lot of volatility since the UK's vote to leave the European Union. While the initial moves were dramatic, plunging from the highs of $1.50 to a 31-year low of $1.32, the currency continues to remain under pressure at current levels of $1.28. Sterling is down more than 15 percent since referendum day.

Postcards showing the British Union flag, also known as Union Jack, sit on display at a souvenir store near to the Elizabeth Tower, also known as 'Big Ben', in London, U.K. Luke MacGregor | Bloomberg | Getty Images

The currency, however, saw a near 4 percent rally on Tuesday jumping from $1.25 initially and ending the trading day around $1.28.

Will the rally last?