THE pound lost ground against the euro on Thursday, as investors reacted to higher eurozone growth forecasts and signs that the European Central Bank's (ECB) may consider winding down its bond buying programme.
Sterling tumbled more than 0.4 per cent against the euro in afternoon trading to trade at 1.088.
That was compared to the pound's 0.4 per cent rise against the US dollar, trading at 1.309.
Investors were piling into the euro after the ECB revised its growth forecasts higher, and reacted positively to news that the ECB seems to finally be discussing the possibility of tapering its quantitative easing (QE) programme.
Fiona Cincotta, a market analyst at City Index, said: "The fact that the ECB have finally started to discuss the winding down of QE also supported the euro.
"Discussion were very preliminary, but the market was just relieved to know that they have started. October still looks to be the month when more information will come regarding the winding down of the bond buying programme and that actually makes sense.
"By October the German elections will be out of the way, the Federal Reserve will have met and there will also be another month of economic data to support a decision.
"And investors were happy to focus on just that - tapering to be discussed next month and no real talk down of the euro."
The FTSE 100 ended the day higher by 0.58 per cent or 42.85 points at 7,396.98.
European peers were also on the rise, with the French Cac 40 up 0.26 per cent and the German Dax up 0.67 per cent.
Brent crude prices rose nearly 0.4 per cent to $53.93 per barrel, supported in part by US dollar weakness, which makes the dollar-denominated currency cheaper for foreign investors.
In UK stocks, Direct Line Insurance shares rose 8p to 379.6p as the industry welcomed Government plans to lower the Ogden discount rate, having bemoaned changes that effectively boosted firms' payouts for personal injury claims earlier this year.
But enthusiasm waned amongst its peers, with Aviva shares down 1.5p to 505p, Prudential down 3.5p to 1,757.5p, and Admiral Group at the bottom of the FTSE 100 down 37p at 1,838p.
Unilever rose 33p to 4,530p after announcing earlier in the day that it had snapped up Bristol-based Pukka Herbs for an undisclosed sum.
The move gives the consumer giant a stronger foothold in the global herbal, fruit and green tea market, estimated to be worth around E1.6 billion (£1.46 billion).
Bovis Homes shares rose 109p to 1,161p despite reporting that pre-tax profits for the half year to June 30 plunged by 31 per cent.
The housebuilder was stung by costs relating to customer complaints over the poor quality of its homes and exceptional advisory costs after defending itself in a string of takeover attempts
The biggest risers on the FTSE 100 were Micro Focus International up 120p at 2,463p, Astrazeneca up 197.5p at 4,774p, Fresnillo up 64p to 1,672p, and GKN up 10.4p at 331.6p.
The biggest fallers on the FTSE 100 were Admiral Group down 37p at 1,838p, BHP Billiton down 27p at 1,457.5p, RSA Insurance Group down 11.5p at 637.5p, and Royal Bank of Scotland Group down 3.4p to 241.2p.
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