This three-day rally was fuelled by a surprise drop in UK inflation, bolstering expectations of more interest rate cuts by the Bank of England later this year.

Despite disappointing retail sales figures and weaker-than-expected growth data for December, investors remain optimistic. Financial markets are now pricing in two to three interest rate cuts in 2024, compared to fewer than two anticipated last week. This has led to a decline in the pound, consequently increasing the value of multinational companies listed in London.

Dan Coatsworth, investment analyst at AJ Bell, said: “The FTSE 100 has hit a new record high despite all the doom and gloom around Budget-related cost pressures on businesses and a sell-off in the government bond market.

He continued: “It’s refreshing to see positive news around the UK stock market given its unloved reputation.

“Helping to drive the index up more than 1% and above its previous intraday record of 8,474 in May 2024 was a further slump in the pound as retail sales came in below expectations for December.

“Three quarters of companies in the FTSE 100 generate their earnings overseas, and the relative value of those foreign earnings is boosted when the pound weakens. The natural resources sector was also lifted by merger and takeover chatter, encouraging investors to bid up shares in the likes of Glencore and Anglo American.

“Weak UK retail sales in December are a worry as they indicate further pressure on the economy following weak GDP data yesterday. Traders are pricing in an 81.5% probability that the Bank of England will cut interest rates by a quarter percentage point next month. Retailers will be keeping their fingers crossed this happens as it could help to take some of the pressure off household finances and encourage more spending.”