The pound has fallen against the dollar on fears over political instability, after Theresa May's poorly-received speech at the Conservative party conference yesterday raised fears over her ability to cling on as prime minister.
After relatively steady trading yesterday, the pound today dropped 0.9% against the dollar to trade at $1.313, while the euro rose 0.5% to 89.2p.
'The Tories prove toxic for the pound once again,' said Kathleen Brooks, research director at City Index.
'The market seems to be ignoring some fairly solid economic data, progress, albeit slow, in the Brexit talks, and a weaker dollar in favour of politics,' she added.
'After Theresa May's speech at the Tory party conference on Wednesday, there are rumours that she will be asked (forced) to step down by her own party. The prospects of a leaderless UK in the middle of the Brexit process, or even worse, a prime minister Boris, are right to unnerve sterling traders.'
Paresh Davdra, chief executive of RationalFX, said traders would be looking to the Bank of England to provide support for the pound.
'However, it remains to be seen if the UK's data is strong enough to support a more hawkish policy from the Bank as is widely anticipated from investors,' he said.
The pound's fall helped to lift the FTSE 100, which rose 27 points, or 0.4%, to 7,495.
A weak pound tends to support the index, whose members rely on overseas markets for around three-quarters of their earnings.
Merlin Entertainments (MERL) was the biggest riser on the index, up 3.1% at 462.5p, after Reuters reported the theme park operator had made a bid for part of US group Seaworld (SEAS.N).
Miners were meanwhile buoyed by a rise in metal prices to near multi-year highs.
Among 'small cap' stocks, Allied Minds (ALML) was the biggest riser, jumping 7.6% to 160p after subsidiary Spin Transfer Technologies secured $22.8 million (£17.4 million) in funding.