Blue-chip shares have raced ahead on the announcement that America's former Treasury Secretary Larry Summers is pulling out of the race to succeed Ben Bernanke as head of the US Federal Reserve.
Mr Summers's withdrawal saw the FTSE 100 Index climb 53.4 points to 6637.2 while the pound climbed to an eight-month high of 1.59 US dollars as the greenback fell.
Markets believe that Janet Yellen, the new favourite to head America's central bank, may not be in favour of scaling back quantitative easing as aggressively as it appeared Mr Summers would be.
The next meeting of the Federal Reserve takes place this week, with members thought likely to vote for a modest tapering of asset purchases.
But fears of a more severe cutting back of the quantitative easing (QE) programme further down the track eased off after Mr Summers, seen as a sceptic on QE, stepped aside from his position as front-runner for the Fed role.
The prospect of billions of dollars continuing to be pumped into the US economy had the dual effect of lifting stocks and pushing down the dollar.
Joshua Mahony, research analyst at Alpari, said: "There is no surprise that the markets have taken to this move in a highly positive manner, given the fact that tapering would likely be more drawn out under Yellen than Summers."
Investors were also cheered by the agreement between Russia and the United States on Syria's chemical weapons, which pushes the prospect of a feared conflagration in the Middle East into the distance.
Germany's Dax and France's Cac 40 also climbed strongly on the positive sentiment.
In London, airline stocks were among those appearing high up the risers board on hopes that oil prices will be eased by the developments in the Middle East.
In corporate news, fashion retailer French Connection was 3% lower after it reported pre-tax losses narrowed only slightly from £6.3 million to £6.1 million.
Like-for-like sales in its UK and Europe outlets were down 4.5% in the half-year to the end of July, though founder and chief executive Stephen Marks noted "considerable progress" in the company's turnaround plan. Shares fell 1p to 32p.
Miner Fresnillo suffered the worst fall on the FTSE 100, plunging by more than 13%, or 162.5p, to 1035.5p on the prospect of a levy on the mining sector in Mexico.