The pound climbed to $1.4301, up 0.7 per cent overnight, as market chatter and hearsay suggested traders believe the suspension of campaigning could boost the chances of the Remain side coming home to victory.
The FTSE 100 also recovered some of its losses from earlier in the week, rising an impressive 1.5 per cent to 6,035 by mid-morning.
Banks were the biggest winners on the London market after stocks across Europe were trounced yesterday morning. Lloyds Banking Group climbed 5.4 per cent to 65p, Standard Chartered rose 4.3 per cent to 520p and Barclays was also back in the green, rising 3.8 per cent to 165p.
Sterling also climbed against the euro in early morning trading, up 0.5 per cent at €1.2715.
"Markets have staged an impressive recovery from yesterday’s lows. An easing of Brexit fears may well be behind why a number of UK-focused assets are in demand this morning, with UK banks sitting at the top of the index, as once again an absence of polls acts to calm the market," said Chris Beauchamp of IG.
Yesterday the Bank of England said it believed volatility on the foreign exchange markets in recent weeks was clearly linked to the EU referendum, saying it looked "increasingly likely" sterling would fall sharply should the UK vote to leave.
Economists at Berenberg estimated sterling would fall 12 per cent upon leaving. They said every five percentage point increase in the chances of the UK leaving, as calculated from betting odds, corresponded with a one per cent fall in sterling. With the chances of leaving hovering around 40 per cent, if Brexit becomes a dead certainty, the pound has 12 per cent further to fall, they estimated.
Using the same figures also implies the currency would jump eight per cent - or close to $1.60 - on a vote to Remain.
The odds of Leave slipped overnight to stand at 7/4 - an implied probability of 36 per cent.