Pound resurgence continues as May triumph calms investors
The pound has continued its remarkable rally after Theresa May's victory in the race to become the next prime minister helped calm investor fears over political uncertainty.
Sterling jumped as high as 1.32 US dollars, helping claw back some of the recent dramatic falls seen since the Brexit vote - which saw the pound hit 31-year lows against the greenback.
The pound was also 1.8% higher against the euro at 1.19 euro.
The wider FTSE 100 Index paused for breath, edging down 2.2 points at 6680.7, having surged by nearly 100 points on Monday when it was confirmed Mrs May would be in post as prime minister by Wednesday after rival candidate Andrea Leadsom dropped out of the race.
Foreign exchange traders said the worst may be over for the pound, but warned over further turbulence.
Hussein Sayed, chief market strategist at FXTM, cautioned: " The relief rally led by political clarity is likely to be short-lived as many questions remain unanswered, and the immediate risk will be the Bank of England's meeting on Thursday, which is likely to announce new stimulus measures in response to Britain's shock vote to leave the EU."
Markets worldwide were also on the front foot, with indices across Europe making strong gains. The Dax in Germany lifted 1.3% and France's Cac 40 was 1.6% higher.
The price of oil was up 3.1% at 47.70 US dollars a barrel as the dollar weakened amid concerns over the growing risks to global markets.
The rise came as g lobal oil cartel Opec cut its forecast for world growth this year and said demand for crude from Europe would slow in the wake of the Brexit vote.
The Organisation of the Petroleum Exporting Countries, which controls more than a third of the world's oil supply, warned over the impact of "economic uncertainty" following the referendum decision.
London's top flight index has technically entered a bull market after closing more than 20% higher than its low of 5537 on February 11.
The FTSE 100 has been boosted by the prospect of interest rate cuts and more economy-boosting measures by the Bank of England when it announces its latest monetary policy move on Thursday.
Its rally has been fuelled further thanks to Monday's flurry of political announcements, which helped to demystify some of the uncertainty dogging the financial markets since Britain voted to leave the EU.
Tony Cross, market analyst at Trustnet Direct, said: "The City is no fan of uncertainty so the fact that we now have a new prime minister should at least start to pave the way for the next chapter when it comes to Brexit."
There were also further gains for the FTSE 250 Index - deemed a better barometer for the health of the UK economy - which rose another 0.6%.
British Airways owner IAG was the biggest riser on the top tier after Qatar Airways said it would consider increasing its stake in the company beyond 15.67%.
Shares in IAG were up 5% or 19.7p to 409.9p.
Housebuilders continued their bounce back, with blue chips Taylor Wimpey and Barratt Developments leading the top tier higher, climbing 4.5p to 145.3p and 11.3p to 413.3p respectively.
Financial stocks and retailers, which had also been hit hard after the Brexit vote, were likewise recovering further.
Marks & Spencer shares lifted 4.9p to 334.3p, while Barclays stepped up 3.2p to 148.6p and Lloyds Banking Group rose 1.4p to 56.3p.
But mining groups and more defensive stocks were in the red, such as silver miner Fresnillo, with shares off 55p to 1929p , and drugs giants AstraZeneca slipping 80p to 4476p.
The biggest risers on the FTSE 100 Index were International Consolidated Airlines (IAG) up 19.7p to 409.9p, Glencore up 8.2p to 186p, St James's Place up 36p to 825.5p, easyJet up 47p to 1142p.
The biggest fallers were Mediclinic International, down 56p to 1060p, Randgold Resources, down 410p to 9115p, HIKMA Pharmaceuticals, down 95p to 2505p, and Fresnillo, down 55p to 1929p.