Business

FTSE 100 closes flat as sterling recovers

Trader watching monitor Image copyright AFP

UK shares closed the day flat as the pound recovered from losses against the dollar earlier in the session.

The FTSE 100 share index was up just 6 points at 7,178.

Earlier the index had traded higher as sterling fell by a cent, but the pound regained ground to close at $1.2474.

The FTSE 100 usually benefits when the pound weakens as, for the multinational companies listed on the index, overseas earnings are worth more when they are converted back into sterling.

The pound's earlier drop against the dollar had been driven by the possibility of an earlier-than-expected rise in US interest rates.

But that was then reversed as, according to Neil Wilson from ETX Capital, Bank of England policy maker Kristin Forbes suggested she was close to voting for a rate rise to combat the threat of inflation.

"We already knew the Bank has a finite tolerance for inflation overshooting but this sounded a tad more hawkish than the tone of last week's forecasts and press conference," Mr Wilson said.

BP shares were the biggest fallers on the index, down 4%, after the oil giant's latest profits fell short of expectations. The company reported underlying replacement cost profit of $400m for the fourth quarter, but analysts had hoped for $560m.