Pound makes gains after fresh data shows manufacturing output continued to grow
The pound made gains on Wednesday after fresh data showed Britain's manufacturing output continued to grow in January, despite rising price pressures.
Sterling rose 0.5% against the US dollar to 1.264 and jumped 0.9% versus the euro to 1.175.
The FTSE 100 was also upbeat, closing higher by 8.5 points at 7,107.65.
Investors were reacting to the closely-watched Markit/CIPS UK Manufacturing purchasing managers' index (PMI), which showed that the measure of output reached 55.9 in January, lower than 56.1 in December, but in line with economist expectations.
A reading above 50 indicates growth.
That was amid record rising commodity prices and the post-Brexit slump in sterling, which sent input cost inflation to record highs.
Michael Hewson, chief market analyst at CMC Markets UK, said. "This in turn saw output prices also rise sharply and appears to have prompted increasing speculation that the next move on UK rates could well be higher and possibly before the end of the year."
Investors were also poised for the Bank of England's latest interest rate decision and first inflation report of 2017, due on Thursday.
Economists are widely expecting that the Bank will keep interest rates on hold at 0.25%.
Across Europe, the French Cac 40 and German Dax rose 0.96% and 1%, respectively
In oil markets, Brent crude prices started to pare gains to trade 0.9% higher at 55.99 US dollars per barrel (£44.28) after data pointed to another rise in US stockpiles, raising fears that American production could counteract Opec supply cuts.
In UK stocks, BT shares rose 1.75p to 305.6p following news that the former trade union chief and current Acas chairman Sir Brendan Barber will sit as an independent member of the newly formed board of BT's infrastructure arm Openreach.
BT made the announcement amid calls to separate Openreach from the rest of the business.
TalkTalk shares rose 11.9p to 168.4p after the company announced that chief executive Dido Harding would step down in May after seven years at the telecoms firm. She will be replaced by the managing director of consumer, Tristia Harrison.
Shares in AG Barr rose 8p to 510p after the Irn-Bru maker said cost controls and a bump in second-half trading have put it on track to meet full-year profit guidance.
It is expecting to report £257 million in revenue for the 52 weeks to January 28 when it reports full-year earnings at the end of March.
Wizz Air Holdings shares fell 165p to 1,616p after the low-cost European airline said it would take a 10 million euro (£8.6 million) hit from weaker-than-expected air fares as lower fuel costs helped rival airlines slash prices across the market.
The biggest risers on the FTSE 100 were Hikma Pharmaceuticals up 56p to 1,880p, Pearson up 18.5p to 637.5p, Barratt Developments up 12.3p to 490p, and Micro Focus International up 51p to 2,196p.
The biggest fallers on the FTSE 100 were Provident Financial down 83p to 2,642p, Mediclinic International down 23.5p to 761.5p, Randgold Resources down 140p to 6,615p, and Severn Trent down 37p to 2,233p.