The pound soared after Bank of England governor Mark Carney hinted at a potential interest rate hike.
But sterling’s rise took its toll on the FTSE 100 index which was down 46.56 points at 7,387.8, with multi-national stocks feeling the heat.
Carney suggested that rates could rise if wages firm and the economy is boosted by stronger business investment.
He said “some removal of monetary stimulus is likely to become necessary”, but would depend on whether a drop in household spending is countered by more companies ploughing money back into their businesses.
Neil Wilson, senior market analyst at ETX Capital, said the intention was “surprising”.
“Coming off the back of the 5-3 split at the last MPC meeting and hawkish comments from the Bank’s chief economist, Andy Haldane, it’s the clearest signal yet that the Bank is minded to tighten.”
Outsourcing firm Bunzl lifted 1 per cent following a trading update where it said revenues would rise thanks to a boost from new business in the US.
Shares were up 34p to 2,343 as the company also announced deals for three businesses in Spain and Canada.
Electricals retailer Dixons Carphone slipped back despite batting away fears of a consumer spending slowdown and said it had seen “no changes yet”.
The FTSE 250 firm reported underlying pre-tax profits of £501 million for the full year, up from £457m the previous year.
Shares closed down 2.2p to 293.7p.