Rumours of an agreement between the UK and EU on financial services sent the pound higher on Thursday, supported by the outlook from the Bank of England as it maintained interest rates.
Sterling jumped 1.5% to 1.297 US dollars and tracked 0.86% higher against the euro to 1.138.
Earlier in the day, reports suggested that a deal had been struck “in principle” which would give UK financial services continued access to the bloc after Brexit.
Omar Ali, UK financial services leader at EY, said: “Brexit uncertainty has hovered over the financial sector since the referendum and today’s rumours of a deal in principle is welcome news. The importance of the financial services sector to the UK economy is evident by the rise in the value of sterling as reports filtered out.
“We shouldn’t get too carried away though. Any proposals based on current EU equivalence frameworks would not provide the access that firms currently get through EU passport, so the depth, breadth and enforcement mechanisms of any new arrangements will be critical.”
The biggest risers on the FTSE 100 were BT Group, up 20.7p to 261.25p, Smith & Nephew up 83.5p to 1,357p, Just Eat up 38.4p to 646p, and Melrose Industries up 9.8p to 178.45p.
The Bank of England’s monetary policy committee voted to hold interest rates at 0.75%.
Encouraging words from governor Mark Carney regarding the health of the economy should a Brexit deal be achieved helped support the boost to the pound.
“The BoE was more hawkish than the market was expecting, which explains the continued moved higher in the pound,” said Fiona Cincotta, a senior market analyst at City Index.
“Yet, the reality is we still have to wait and see whether an orderly Brexit will be achieved.”
The FTSE 100 ended the day slightly lower, weighed on by oil stocks.
Royal Dutch Shell’s ‘A’ shares fell 76p to 2,424.5p and its ‘B’ shares were down 90p to 2,475p, even after the company cheered one of its “strongest ever quarters” as surging oil prices drove earnings up 37%.
The oil giant reported underlying earnings, on a current cost of supplies basis, of 5.6 billion US dollars (£4.4 billion) for the three months to the end of September, slightly below what analysts had expected.
BP was also trading lower, down 25.8p to 541.5p.
The biggest fallers on the FTSE 100 were Wood Group down 33.2p to 681p, BP down 25.8p to 541.5p, Smurfit Kappa down 98p to 2,468p and Royal Dutch Shell ‘B’ down 90p to 2,475p.
Oil prices dipped again, as rising supply and a gloomy mood on the global markets weighed on sentiment.
A barrel of Brent Crude was trading 2.42% lower at 72.77 US dollars.
Elsewhere on the London market, shares in Just Eat climbed 38.4p to 646p, despite its prediction that full-year performance will be dented by investment in fighting off rivals and expansion into Latin America.
Just Eat’s annual revenues are expected to come in at the top end of its £740 million to £770 million range after soaring 41% in the third quarter to £195 million.
BT shares also pushed higher, closing 20.7p ahead at 261.25p after the telecoms giant said it expects annual profit to come in at the upper end of expectations after what it called an “encouraging” half-year showing.
In Europe, the French Cac was down 0.15% but the German Dax was up 0.18%.
The biggest risers on the FTSE 100 were BT Group, up 20.7p to 261.25p, Smith & Nephew up 83.5p to 1,357p, Just Eat up 38.4p to 646p, and Melrose Industries up 9.8p to 178.45p.
The biggest fallers on the FTSE 100 were Wood Group down 33.2p to 681p, BP down 25.8p to 541.5p, Smurfit Kappa down 98p to 2,468p and Royal Dutch Shell ‘B’ down 90p to 2,475p.
