The pound climbed higher on Monday amid hopes that the UK Government may be on track to break a deadlock with the EU over the so-called Brexit divorce bill.
Sterling was up 0.2% versus the US dollar at 1.323 and jumped more than 0.6% to trade at 1.127 versus the euro.
The FTSE 100 also ended the day higher up 0.12% or 8.78 points at 7,389.46 points.
Investors were holding out hope that Brexit talks could progress after Prime Minister Theresa May said that the UK would “honour our commitments” and “no other European Union country needs fear that they will have to receive less or pay in more”, during a visit to Birmingham on Monday morning.
Reports have also emerged that the Cabinet’s Exit and Trade (Strategy and Negotiations) sub-committee could approve a further £20 billion in payments, bringing the total offer to around £38 billion.
However, it would still be well short of the 60 billion euro (£53 billion) sought by Brussels.
David Madden, a market analyst at CMC Markets UK, said: “GBP/USD is up on the day after it was reported that Theresa May is looking to pay a higher ‘divorce bill’ to the EU.
“Prime Minister May appears to be open to the idea of paying more away in order to speed up the negotiations. Getting support from her Cabinet or the general public could be a different story altogether, but for now traders are happy to hear it.”
Across Europe, the French Cac 40 ended the day up 0.4%, while the German Dax rose 0.5%, having endured volatility throughout the trading session.
It comes after Conservative chancellor Angela Merkel’s talks on forming a coalition with the pro-business Free Democrats and traditionally left-leaning Greens collapsed on Sunday night – creating uncertainty over the timely formation of the German government and raising the possibility of another election.
Brent crude prices tumbled 1.4% to 61.81 US dollars per barrel as investors took less bullish positions ahead of next week’s Opec meeting in Vienna, where members are expected to decide on whether to extend current production caps.
In UK stocks, Mediclinic International and Spire were the worst performers on the FTSE 100, falling 17p to 538.5p, and 99.5p to 3,579p, respectively.
Mediclinic International said it will not make a further swoop for Spire after a breakdown in takeover talks, with Spire saying the offer undervalued the firm and its prospects.
Shares in British Gas owner Centrica dropped 1.8p to 161.4p after the company said it was scrapping standard gas and electricity tariffs for new customers ahead of Government plans to impose a price cap on the costly energy products.
The Big Six firm said the reforms – which follow similar pledges made on SVTs by E.On and Scottish Power – will be enforced by the end of March next year.
SSE fell 15p to 1,331p after Ofgem launched an investigation into the energy firm’s “cheapest tariff” messaging to prepayment customers.
Away from the top tier, DFS rose 2p to 192.5p after the competition watchdog waved through the sofa firm’s £25 million swoop for smaller rival Sofology.
The biggest risers on the FTSE 100 were Barclays up 3.75p at 188.75p, Glencore up 6.4p at 359.85p, Intertek Group up 90p at 5,405p, and BAE Systems up 9p at 544.5p.
The biggest fallers on the FTSE 100 were Mediclinic International down 17p at 538.5p, Shire down 99.5p at 3,579p, Convatec Group down 4.4p at 201p and Hammerson down 7p at 526.5p.