http://news.bbc.co.uk/2/hi/business/8181161.stm

Pound and FTSE hit 10-month highs

The pound and the FTSE 100 index of top UK-listed shares have hit their highest levels since October on growing hopes for an economic recovery.

Markets took heart after brighter UK economic data and a rally in financial stocks following profits from banking giants HSBC and Barclays.

Sterling rose as high as $1.6879 against the dollar and also hit a one-month high against the euro.

The FTSE 100 index rose as high as 4,693.06 points.

Shares in Barclays climbed 6.7% after reporting an 8% rise in half-year profits, while HSBC rose 5.1% after it made better-than-expected profits of $5bn.

In early afternoon trade, the FTSE 100 was up 1.55%, or 71.4 points, at 4,679.76 points.

Oil prices also rose to a one-month high above $71 a barrel, as an economic recovery should lead to greater demand for crude.

The pound got a lift after data showed the UK manufacturing sector expanded for the first time in more than a year.

Manufacturing activity rose last month for the first time since March 2008, as new orders came in, according to a survey by the Chartered Institute of Purchasing and Supply (CIPS) and Markit.

"The manufacturing sector has clearly pulled out of the nosedive it was in earlier this year and is no longer plummeting," said David Noble, chief executive of CIPS.

While still a long way below the $2 levels seen in July last year, the pound has rebounded 25% from the 23-year low of $1.35 it hit in January this year.

The pound has also benefited from recent weakness in the dollar.

The US currency has suffered as signs of a global economic recovery have encouraged investors to move their money out of dollars and into riskier assets.

The dollar is trading near its lowest levels this year when measured against a group of major currencies.