The pound has risen sharply after Britain and Ireland issued a joint statement saying they "could see a pathway" to a possible Brexit deal.
Sterling spiked by more than two and a half cents against the US dollar to just under $1.25 and was on course for its largest one-day percentage gain in seven months.
The UK currency also surged by two cents versus the euro to €1.13.
It came after Irish Prime Minister Leo Varadkar said following talks with Boris Johnson that he was "now absolutely convinced" that Britain wanted a Brexit deal and that it was possible to achieve one by the end of October.
The pound has been gripped by the twists and turns of the Brexit saga, with fears of a no-deal dragging on the currency as the deadline for the UK to leave at the end of this month nears - and any signs of hope for an agreement tending to boost the currency.
On the FTSE 100, UK-focused banks Lloyds Banking Group and Royal Bank of Scotland climbed 4% and 3%.
But the wider index was held back by the strength of sterling - which tends to weigh on many of the London-listed multinationals that earn most of their revenues in foreign currencies.
Some analysts were cautious about the extent of progress yielded by the talks between Mr Johnson and Mr Varadkar, with the issues of consent of Northern Irish voters for post-Brexit arangements and customs checks still sticking points.
Joshua Mahony, senior market analyst at IG, said: "While they agreed a solution could be found, it seems the meeting was light on details on exactly how this Ireland-based deadlock could be broken."