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(Close): Sterling gained modest ground against the euro on Wednesday, as the UK formally announced the start of its process to leave the European Union.

The pound reversed earlier losses and was 0.21% higher at 1.1537 euros after the UK delivered the letter formally starting the Brexit process.

But against the dollar, sterling gave up brief gains, falling 0.37% to $1.2406.

The FTSE 100 index rose 30 points or 0.41% at 7,373.72.

Shortly after midday, Prime Minister Theresa May gave official notice under Article 50 of the Lisbon Treaty of the UK's decision to leave the EU.

"The countdown to Brexit has begun but by and large markets shrugged off the triggering of Article 50," said Neil Wilson, senior markets analyst at ETX Capital.

"Stocks and the pound took the momentous decision in their stride - largely as expected as Brexit was already priced in.

"We might have expected a touch more volatility as the UK delivered the letter but markets were pretty calm. They may not stay that way," he added.

The pound has fallen by more than 15% against the dollar since the EU referendum. In the last six months it has largely traded in a range between $1.20 and $1.28.

'Crossing the Rubicon'

Attention will now turn to the tone struck by both sides at the start of the two-year negotiations, analysts said.

"It seems market participants have taken some comfort from the conciliatory tone adopted by the Prime Minister," said Adam Chester, head of economics for Lloyds Bank Commercial Banking.

"Her desire to achieve an orderly withdrawal is clearly expressed in the tone of her statement and the Article 50 letter," he added.

Philip Lawlor, chief investment strategist at Smith & Williamson, said the Article 50 letter was a "crossing the Rubicon moment".

The first six months of the talks will be political - which could lead to a bumpy ride for the pound, he said.

But any sign that the UK and EU could reach a mutually beneficial deal would help lift sterling, he said. That's because "the market thinks the talks are going to be relatively ugly".

Chris Saint, a currency analyst at Hargreaves Lansdown, said the pound was also helped by Bank of England data showing UK consumer borrowing appetite remained robust last month.

On the FTSE 100, the best performer was 3i Group, adding 5.7% on the strength of a broker upgrade from Morgan Stanley.

The London Stock Exchange Group was the second highest climber - up by 2.71%. The rise came after EU regulators blocked London Stock Exchange's £21bn merger with German stock exchange Deutsche Boerse.

The FTSE 250 index, which is seen as a better gauge of UK businesses, closed slightly ahead at 18,978.65, a rise of 25 points or 0.13%.