The pound staged its biggest rally in almost three years and shares surged after Boris Johnson's Conservative party secured a decisive victory in the general election.
Sterling's dramatic gains saw it reach a 19-month high versus the United States dollar and its strongest levels against the euro since shortly after the 2016 Brexit referendum.
Against the euro, the sterling rose around 2% to as high as 82.80 pence, the highest since July 2016, which is shortly after the Brexit referendum that hammered the currency.
UK equities were basking in the warm glow of the Tory victory as investors threw out their worst-case scenarios for the British economy"
The pound surged more than 2% to reach $1.3516, the highest since May 2018, before settling at $1.3469. That contrasts with the more than 10% plunge that immediately followed Britain's vote to leave the European Union in June 2016, which wiped $2trn off world markets.
Chastened by three-and-a-half years of political instability in the United Kingdom, investors have seized on the likelihood of a decisive Conservative majority, believing it will enable Johnson to deliver Brexit with his withdrawal agreement in January, ending any residual no-deal exit fears.
"Just as Boris Johnson was desperately seeking his majority, this result would give the markets their ultimate wish: clarity," said Dean Turner, economist at UBS Wealth Management.
A stronger pound can be a bad thing for British companies, making it harder for them to sell their goods in the eurozone and beyond and diluting the profits they bring back from overseas.
Nonetheless, British markets have also risen since the campaign began, reflecting the prospect of a Conservative victory that would not only reduce the chances of a no-deal Brexit but also avoid the nationalisation ambitions of the opposition Labour Party.
Russ Mould, investment director at AJ Bell said: "The Conservative majority win at the General Election has driven a rally in the pound and UK domestic stocks. The currency jumped 2.7% to $1.34189 compared to last night on confirmation that Boris Johnson's party had been victorious and that this outcome removes several key risks that have been hanging over the UK stock market.
"It removes the threat of Labour trying to renationalise many sectors, explaining why shares in Royal Mail jumped 8% to 250.4p, transport companies rallied - Go-Ahead up 7% to 135p and Stagecoach up 14% to 150.5p - and utility stocks were back in fashion, including Centrica up 14% to 92.04p.
"The fact that there also won't be a hung parliament has given support to equities. The market now has more confidence that Johnson should be able to pass a Brexit deal and for the UK to formally leave the EU at the end of January 2020."
The FTSE 250 index of 'mid-cap' companies, more exposed to the UK domestic economy than the blue-chip stocks of the FTSE 100, soared 4%.
UK domestic stocks meanwhile surged to the top of the FTSE 100, helping the more internationally-focused index climb 78 points, or 1.1%, higher to 7,351 despite the pound's strength.
'What we are seeing this morning is the market breathing a sigh of relief rather than starting a full-blown Christmas party,' said Matthew Jennings, investment director at fund group Fidelity.
'The tail risk of an anti-business Labour government is now obsolete, which has led to a relief rally in politically sensitive sectors such as utilities and banks."
While it has been put outshined by the FTSE 250, the rise by the FTSE 100 is still worth noting.
The index of London's heavy hitters was up 124 points (1.7%) to 7,397, with just 16 of the index's constituents in the red.
"UK equities were basking in the warm glow of the Tory victory as investors threw out their worst-case scenarios for the British economy," said Neil Wilson, the chief markets analyst at Markets.com.