The pound plunged Friday as Prime Minister Theresa May's Conservatives lost its parliamentary majority in Britain's general election, fuelling political uncertainty just days before the start of Brexit talks.
The pound sterling slumped in early morning deals to a seven-week low of $1.2636, while the euro hit a seven-month peak at 88.59 pence.
However, that propelled the London stock market higher as the weaker pound boosts multinational companies that earn in currencies other than sterling. Investors also brushed off news of a monthly rise in industrial output.
May had called Thursday's snap vote in a bid to boost her Conservative party's hold over parliament and give her a stronger hand in upcoming talks with EU leaders over the country's detachment from the bloc.
However, leftist Jeremy Corbyn's Labour Party slashed the Conservatives' lead, leaving the country with a hung parliament.
That means that no single party has the 326 seats required for an absolute majority, sparking speculation that May will seek the support of Northern Ireland's Democratic Unionist Party (DUP).
Conservatives lose majority
"The FTSE was up... as sterling fell after the Conservatives lost their majority in the Commons," said Russ Mould, investment director at stockbroker AJ Bell.
"Prime Minister Theresa May's gamble on a snap election to give her a strong mandate for Brexit talks failed, casting a pall of uncertainty over the forthcoming negotiations."
With one constituency still to be declared, the Conservatives were on 318 seats - down from 331 at the 2015 general election - while Labour was on 261, up from 229.
The embattled premier will meet Queen Elizabeth II later Friday and seek permission to form a new government.
"We may be in turmoil politically but the FTSE is finding some upside after a night of drama," added analyst James Hughes at trading firm GKFX.
"A weaker pound helps to boost companies publicly quoted in the UK and props up the equity markets."
The election outcome throws Britain once again into upheaval less than a year after the country's decision to leave the EU, which had already led the pound to collapse about 15 percent against the dollar between June and October 2016.
Elsewhere on Friday, French and German equities also advanced after a broadly positive session in Asia.
No 'smoking gun'
Wall Street enjoyed overnight gains as investors shrugged off dramatic political events.
Testimony from sacked FBI boss James Comey that President Donald Trump asked him to drop a probe into former national security advisor Mike Flynn had little effect on sentiment.
"While it may have made uncomfortable hearing for the US President, there did not appear to be any smoking gun," noted CMC Markets analyst Michael Hewson.
Washington nevertheless buzzed with new questions after Comey accused Trump of lies and defamation, in gripping testimony that undermined an already troubled White House.
However, Trump on Friday claimed "total and complete vindication" after Comey revealed he was not personally under investigation in a probe into Russian interference in last year's US election.
