The pound was boosted by the prospect of an interest-rate hike from the Bank of England, after its chief economist said he may vote for a rise later this year.
Sterling jumped 0.3 per cent to $1.266 against the US dollar after Andy Haldane made the comments during a speech in Bradford.
Versus the euro, the pound was up 0.3 per cent at €1.136. But the currency’s strength weighed on the FTSE 100, which ended the day down 24.92 points at 7,447.79.
Haldane argued that rates should be kept steady in the near-term, but that he could change course by year-end if the economy shows signs of strength.
It raises the prospect of a rate hike by the end of the year after three policymakers at the central bank voted for a rate rise last week.
Investors were also digesting data from the Office for National Statistics, which showed government borrowing was at its lowest level for ten years in May.
In UK stocks, Whitbread jumped 131p to 3,984p after revealing that its Premier Inn hotel chain saw sales rise 4.7 per cent in the first quarter, which helped overall group sales lift by 2.9 per cent.
Centrica rose 4.3p to 206.4p following news that the British Gas owner has struck a deal to offload two gas power plants for £318 million.
The biggest risers on the FTSE 100 included Shire up 89.5p to 4,460p, and International Consolidated Airlines Group up 11.5p to 602.5p.
The biggest fallers included Hargreaves Lansdown down 33p to 1,329p and St James’s Place down 22p to 1,205p.