THE pound surged to a 10-month high against the dollar on Friday as disappointing US inflation and retail sales data sent investors fleeing from the US currency.
Sterling shot up 1.1 per cent versus the US dollar to 1.309 in afternoon trading, a level not seen since mid-September.
Against the euro, the pound rose 0.6 per cent to 1.141.
The currency move knocked the FTSE 100 - as multinational firms on the blue chip index tend to benefit when foreign currencies are stronger. The index ended the day in the red, down 0.47 per cent or 35.05 points at 7,378.39.
It follows weaker than expected inflation, retail sales, and consumer sentiment figures out of the US, raising concerns about the country's growth trajectory.
David Madden, a market analyst at CMC Markets UK, said: "The GBP/USD traded above the 1.30 dollar mark on the back of the disappointing data from the US.
"The pound was gaining ground against the US dollar over the past few days as a mixture of dovish commentary from the US and hawkish remarks from the UK pushed the currency pair higher.
"The signs that US demand is dwindling gave sterling the edge over the US dollar, and there is now a higher probability of a UK rate hike in December than there is from the US."
Across Europe, the French Cac ended the day flat, while the German Dax fell 0.08 per cent.
In oil markets, Brent crude bounced 1.17 per cent to around $48.91 per barrel as the weaker greenback made the dollar-denominated commodity cheaper for international investors.
In UK stocks, Royal Mail shares tumbled 10p to 401p following news that its workers will vote on proposals to reform the company's defined benefit pension scheme, which the company had planned to close next year, amid hopes of averting strike action.
EasyJet edged higher, by 2p to 1,411p, amid news that the carrier has applied for a new new air operator's certificate in Austria that will allow it to continue flying in the European Union after Brexit.
Dixons Carphone fell 4.5p to 260p after the company said it was selling its Spanish operations for €55 million (£48m), with proceeds set to be reinvested into the business.
Carillion shares made marginal gains after losing nearly two thirds of its market value earlier this week.
The troubled construction and infrastructure giant rose 0.7p to 56.15p, having announced it had drafted in HSBC as an adviser as the company embarks on a comprehensive review of its operations.
The biggest risers on the FTSE 100 were Anglo American up 23p to 1,117p, Micro Focus International up 40p to 2,089p, Fresnillo up 23p to 1,481p, and Randgold Resources up 90p to 6,870p.
The biggest fallers on the FTSE 100 were Barratt Developments down 15p to 585.5p, Royal Mail down 10p to 401p, Associated British Foods down 60p to 2,855p, and Merlin Entertainment down 9.6p to 469.4p.
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