Sterling fell to a 13-week low against the US dollar on Tuesday as Brexit comments from Prime Minister Theresa May and German Chancellor Angela Merkel continued to weigh on currency markets.
The pound fell 0.3% versus the US dollar at 1.212, its lowest level since October 12.
Versus the euro, sterling was down 0.3% at 1.146.
Investors were reacting to comments from Chancellor Merkel, who stepped up pressure on Mrs May over Brexit by saying that the EU must consider limiting UK access to the EU single market if it fails to accept free movement of EU citizens.
She added there there must be no negotiations based on “cherry picking” of the Union’s four freedoms of movement for capital, goods, services and people.
It followed a media interview with Mrs May on Sunday, in which she stated the importance of taking control of immigration, though she later played down suggestions that she was ruling out common market membership.
The pound’s weakness helped push the FTSE 100 to a fresh mid-session high of 7,261 points.
Sterling weakness tends to benefit multinational companies listed on the top flight index, as income in foreign currencies boosts pound-denominated earnings.
If the FTSE 100 tops 7,237.77 points at the end of the trading day, it will have closed at a record high for nine straight sessions – making it the index’s longest-ever record closing streak
Across Europe, the French Cac 40 was down 0.16% and German Dax was relatively flat.
In oil markets, Brent crude rose 0.7% to 55.16 US dollars per barrel (£45.43) as concerns over growing US production and the Opec cartel’s ability to drive through cuts to support prices receded.
In UK stocks, Morrisons climbed 4% after the chain upped its full-year profit outlook after better-than-expected sales in the nine weeks to January 1.
The 2.9% surge in like-for-like sales marked its best performance for seven years.
Tesco shares were also up 4% despite Kantar Worldpanel figures showing a 0.1% drop in its market share to 28.2%, with investors otherwise cheering news of a 1.3% jump in sales in the 12 weeks to January 1.
Kantar’s report, which outlined strong trading across the grocery industry over the holidays, also helped Sainsbury shares rise 1.6%.
Shares in online retailer boohoo.com rose 0.7% after the group upgraded its full-year revenue forecasts following a bumper Christmas trading period, as sales in four months to December 31 rose 55% to £114 million.
Majestic Wine shares jumped 3.8% after reporting its best ever Christmas trading figures, with like-for-like sales up 7.5% in the 10 weeks to January 2.
Trinity Mirror shares rose 0.5% as the publisher of the Daily Mirror newspaper confirmed that talks are under way to acquire a minority stake in Daily Express publisher Northern & Shell.
Read the latest opinion pieces from our Energy Voice columnists
- OPINION: Collaboration is key, says BHGE after landing BP Tortue FEED work
- Opinion: When will decommissioning industry set record straight?
- Opinion: Prostate Cancer – The Big Taboo is an industry threat
- Opinion: Environmental focus about more than just compliance
- Opinion: Take time to understand the culture of your people