Prospect of interest rate hike lifts pound
The pound was boosted by the prospect of an interest rate hike from the Bank of England on Wednesday, after its chief economist said he may vote for a rise later this year.
Sterling jumped 0.3% to 1.266 against the US dollar after Andy Haldane made the comments during a speech in Bradford on Wednesday.
Versus the euro, the pound was up 0.3% at 1.136.
But the currency's strength weighed on the FTSE 100, which ended the day down 0.3% or 24.92 points at 7447.79.
Multinational stocks on the index tend to benefit when foreign currencies are stronger than the pound.
Mr 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 Bank policymakers voted for a rate rise last week amid warnings that Brexit-fuelled inflation - which hit 2.9% in May - is set to surge further over the summer.
"(While) Mr Haldane was one of the five Bank of England members who voted to keep rates on hold last week, he doesn't want to keep rates at current levels forever," David Madden, a market analyst at CMC Markets UK, said.
"The pound was at its lowest level versus the US dollar since April this morning, but Mr Haldane's comments squ eezed the sellers and brought in some buyers."
Investors were also digesting data from the Office for National Statistics which showed that Government borrowing was at its lowest amount for 10 years last month in May, falling £300 million to a lower-than-expected £6.7 billion.
Across Europe, the French Cac 40 and German Dax each ended the day down around 0.3%.
Brent crude prices fell 0.4% to around 45.58 US dollars (£36.01) per barrel to six-month lows, amid renewed concerns about oversupply in the oil market.
In UK stocks, Whitbread jumped 131p to 3,984p after revealing that its Premier Inn hotel chain saw sales rise 4.7% in the first quarter, helping overall group sales lift by 2.9%.
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.
Berkeley climbed 67p to 3,294p after posting a 53% hike in profits to £812.4 million for the year to April 30.
News that Phoenix Asset Management has launched a mandatory takeover of Hornby sent the troubled toymaker's shares up 1.5p to 32.75p.
The offer valued the company at £27.4 million.
Gemfields slumped 2.13p to 40p after suggesting that Pallinghurt Resources could fail to gain adequate shareholder backing for its takeover bid.
Provident Financia l tumbled 504p to 2,361p after warning that reorganising its home credit division would take a much bigger toll on profits than expected.
The biggest risers on the FTSE 100 were Whitbread up 131p to 3,984p, Centrica up 4.3p to 206.4p, Shire up 89.5p to 4,460p, and International Consolidated Airlines Group up 11.5p to 602.5p.
The biggest fallers on the FTSE 100 were Provident Financial down 504p to 2,361p, Hargreaves Lansdown down 33p to 1,329p, St James's Place down 22p to 1,205p, and Standard Life down 6.2p to 392.2p.