With Angelique Ruzicka, finance editor

There was optimism in the air last week as the pound nudged briefly over $1.50. Analysts attributed this to improved risk sentiment in equity markets and glimmers of an uplift in housing and manufacturing. The pound also improved against the euro.

“The prospect of further rate cuts and quantitative easing in the euro zone have taken the gloss off the euro,” said John Dolan, analyst for No1 Currency. “This coupled with the prediction that the EU economy is likely to contract by 3% has helped sterling gain territory over the week.”

The pound’s plunge against the dollar earlier this year prompted insurers such as Chaucer and Hardy to raise capacity. But optimism was dampened on Monday, ahead of yesterday’s

Budget, pushing the pound down to $1.45. Dolan was unsure if it would bounce back.

“There is still a lot of uncertainty. The main reason it dropped is worry about the Budget, which weighs heavily on sterling. Over the medium term, however, there are signs of improvement. We hope it will reach $1.55 over the next three months.”

Bank stocks were still buoyed by signs of improvement in the US.

Lloyds TSB’s share price jumped the highest, rising 34.59% to 107p, while Barclays’ and RBS’s increased 20.70% and 16.21% respectively.

Activity among LSE-listed insurers was mostly subdued.