Sterling edged higher on Wednesday, as a better-than-expected UK service sector survey helped ease worries over the UK economic outlook amid a raft of indicators pointing to slower growth.
The pound rose to nearly 0.3% against the US dollar to 1.248 following the release of the closely-watched Markit/CIPS services purchasing managers' index (PMI) survey, after trading flat for most of the morning.
Versus the euro, sterling edged up by 0.5% to 1.170.
The Chartered Institute of Procurement & Supply's services PMI rose to 55 last month, above economists' expectations of 53.4, and bouncing back from a five-month low of 53.3 in February as client demand strengthened.
"Sterling received a lifeline on Wednesday following March's solid Service PMI figure of 55.00 which boosted some confidence towards the health of the British economy", Lukman Otunuga, a research analyst at foreign exchange broker FXTM, said.
"UK services activity in March has logged its strongest increase this year and such may mitigate the Brexit jitters as concerns momentarily ease over a slowdown in economic momentum."
The FTSE-100 index of leading shares also made gains, ending the day higher by 0.1% or 9.86 points at 7,331.68.
Across Europe, the French Cac 40 and German Dax fell around 0.2% and 0.5%, respectively.
In oil markets, Brent crude rose 0.1% to 54.32 US dollars per barrel (£43.52) after American Petroleum Institute (API) data showed that US crude inventories dropped by 1.8 million barrels last week, raising hopes that the global glut may be dissipating.
In UK stocks, Royal Bank of Scotland Group shares rose 3.1p to 239.5p.
It follows news that the management team heading up the bank's Williams & Glyn business is quitting just months after the lender scrapped plans to sell off the branches which had been part of the conditions for its state bailout following the financial crisis.
Royal Dutch Shell's 'B' shares rose 10p to 2,202p as the oil giant announced it will sell its liquefied petroleum gas business in Hong Kong and Macau to DCC Energy for 150.3 million US dollars (£120 million) as it continues a divestment drive.
Away from the top tier, Bovis Homes surged 45.5p to 892p after rival Galliford Try abandoned plans to takeover the company.
It comes just a week after fellow suitor Redrow walked away from the takeover tussle.
Hollywood Bowl shares rose 2p to 168p after reporting a 7.8% rise in sales for the first half of the year, and announcing further expansion plans.
Shares in Wood Group rose 20.5p to 781.5p as the oil services firm said an extra £40 million in cost savings will be made as part of its £2.2 billion takeover of rival Amec Foster Wheeler.
The biggest risers on the FTSE 100 were Whitbread up 115p to 4,015p, Micro Focus International up 61p to 2,384p, Provident Financial up 72p to 3,144p, and British Land Company up 13p to 622p.
The biggest fallers on the FTSE 100 were Old Mutual down 8.7p to 190p, Croda International down 130p to 3,486p, AstraZeneca down 97.5p to 4,857.5p, and Mediclinic International down 12p to 679p.
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