The pound recovered on Friday after being battered by a week of Brexit developments, while the FTSE 100 was at its highest for almost a month.
Sterling climbed 0.29% against the US dollar to 1.329 and was 0.18% higher on the euro at 1.175.
Fiona Cincotta, senior market analyst at spreadbetter City Index, said: “The pound is finding support from rumours that the DUP could be about to get behind Theresa May’s deal in exchange for another hefty sum.
“As (Chancellor Philip) Hammond is drafted in for negotiations, similarities can be drawn to when the DUP agreed to prop up the Government for £1 billion, in 2017. Other Eurosceptic Conservatives ministers are also expected to draw behind the PM’s Brexit in fear of the UK never leaving the EU at all.”
Meanwhile, the FTSE 100 gained 42.85 points, or 0.6%, to close at 7,228.28. This was the index’s highest level for almost a month, coming in just shy of matching the close on February 20.
Michael Hewson, chief market analyst at CMC Markets UK, said it had been helped by “decent performances from oil and gas, house builders and the banking sector” – all of which are exposed to the UK economy.
“It would appear that investors are starting to feed money back into UK equities in the hope that some form of soft Brexit will come about in the coming weeks after the pantomime of this week’s political shenanigans at Westminster,” he said.
In London, Interserve shares were suspended on the London Stock Exchange after shareholders opposed a rescue plan, meaning the outsourcer is set to file for administration.
Before the suspension, shares had dropped 3.3p, or 34.3%, to 6.3p.
Profits at JD Wetherspoon tumbled in the first half of the year as rising sales failed to offset an increase in costs at the pub group.
Pre-tax profits in the six months to January 27 fell 18.9% to £50.3 million as costs rocketed, especially labour, which increased by about £33 million.
Shares rose 36p to close at 1,328p.
The Restaurant Group also posted a decline in profits, as it booked higher costs relating to store closures and the recent £559 million acquisition of Wagamama.
The owner of Garfunkel’s and Chiquito made a pre-tax profit of £13.9 million in 2018, compared with £28.2 million the year earlier
But shares rose 12.8p to 139.4p as sales figures showed a boost from Wagamama.
Elsewhere, the French Cac jumped 1.04% and the German Dax was 0.85% higher.
But oil prices were lower, as traders expected the pace of Opec’s production cuts to slow.
A barrel of Brent crude oil was trading at 67.06 US dollars, down 0.16%.
The biggest risers on the FTSE 100 were Whitbread up 236p to 5,114p, Paddy Power up 245p to 5,945p, Standard Life up 9.05p to 5,945p and GVC Holdings up 16p to 546p.
The biggest fallers on the FTSE 100 were Morrisons down 3.85p at 221.15p, Sainsbury’s down 3.3p to 223.8p, 3I Group down 10.8p to 949.2p and BP down 5.4p to 544.5p.