The pound jumped against the dollar and euro Thursday after the High Court in London ruled that parliament must approve the start of Britain's withdrawal from the European Union.
Sterling -- which has tumbled to multi-year low points against its main rivals since Britain voted June 23 for Brexit -- surged above $1.24.
However the pound's big jump weighed on London's benchmark FTSE 100 index which has won strong support since the referendum outcome as the weak currency benefitted exporters. It stood down 0.5 percent in afternoon trade, while Frankfurt added 0.07 percent and Paris climbed 0.5 percent.
The court ruling has "made triggering Brexit a lot trickier and has given sterling a massive shot in the arm", said Neil Wilson, markets analyst at ETX Capital.
"The news sent the pound roaring through $1.24 before gains were pared as markets digest the news -- the fact is no one really knows what the implications of this decision are yet."
Downing Street said it was "disappointed" at the decision and would appeal, with the case now likely to go to the Supreme Court before the end of the year.
Meanwhile, the Bank of England on Thursday hiked its economic growth forecast for next year, as it froze its key interest rate at a record-low 0.25 percent and left stimulus unchanged.
The BoE raised its prediction for 2017 GDP expansion to 1.4 percent from 0.8 percent as early fears of a sharp slump due to the shock of the June Brexit vote failed to materialise.
Ahead of the decision, a closely-watched survey Thursday showed output in Britain's key services sector rose last month despite costs rising at the fastest rate in more than five years.
The Markit/CIPS services purchasing managers' index (PMI) hit 54.5 in October, up from 52.6 in September and above analyst expectations of 52.5. A reading above 50 indicates growth.
- US election in view -
Elsewhere Thursday, eurozone stock markets rose. But Asian equities struggled again, with uncertainty over next week's presidential election sending investors rushing for the sidelines, pushing safe havens such as the yen and gold higher.
With (Other OTC: WWTH - news) just days to go until the November 8 poll, maverick tycoon Donald Trump has narrowed the gap with market-favourite Hillary Clinton, whose lead had once been considered unassailable, upending early confidence.
The former secretary of state is considered by most investors to be a safer, more stable bet than Trump, who is seen as a loose cannon.
"We have reached a point where there is a buyers' strike, where money managers have reduced their risk."
The rush for safety saw gold prices climb back above $1,300 an ounce Wednesday for the first time since the start of October.
Fears of a Trump presidency has led to speculation the Fed could hold off a December rate increase -- which has been largely priced into markets -- owing to fears about his impact on the economy.
Wall Street edged higher in opening trade on Thursday after four straight days of losses on election anxieties, with the Dow gaining 0.1 percent.
- Key figures around 1330 GMT -
Pound/dollar: UP at $1.2468 from $1.2298 Wednesday
Euro/pound: DOWN at 88.76 pence from 90.24 pence
Euro/dollar: DOWN at $1.1066 from $1.1097
Dollar/yen: DOWN at 103.21 yen from 103.35 yen
London - FTSE 100: DOWN 0.5 percent at 6,810.21
Frankfurt - DAX 30: UP 0.07 percent at 10,377.95
Paris - CAC 40: UP 0.5 percent at 4,435.37
EURO STOXX 50: UP 0.4 percent at 2,990.68
New York - Dow: UP 0.1 percent at 17,982.93
New York - S&P 500: UP 0.1 percent at 2,100.19
Hong Kong - Hang Seng: DOWN 0.6 percent at 22,683.51 (close)
Shanghai - Composite: UP 0.8 percent at 3,128.94 (close)
Tokyo - Nikkei 225: Closed for a public holiday
Oil - Brent North Sea: UP 18 cents at $47.04 per barrel
Oil - West Texas Intermediate: UP 05 cents at $45.39