Sterling struggled to find direction as unemployment rates held steady and investors mulled the likelihood of further stimulus by the Bank of England.
The pound lost steam after climbing by as much as 0.28% to 1.322 against the US dollar before trading closer to 1.319 later in the day.
Sterling was down by 0.39% against the euro at 1.171.
Meanwhile, the FTSE 100 closed marginally higher, by 7.68 points to 6673.3, as miners led gains following strong economic data from China.
The UK currency markets were driven in part by l abour figures released by the Office for National Statistics (ONS) which showed that the UK employment rate held steady at 4.9% , with 31.8 million people in work in the three months to July - 174,000 more than the previous quarter.
However, the jobless claimant count in August increased by 2,400 to 771,000 between July and August, the ONS said.
These were the first official labour figures to include the period following the EU referendum.
Howard Archer, chief European and UK economist at IHS Markit, said: "The labour market is currently proving resilient as employers seemingly adopt a wait-and-see approach after June's Brexit vote. However, it still looks likely to be increasingly pressurised by mounting uncertainties over the coming months."
Meanwhile, investors were also weighing the possibility of further action by the UK's central bank.
Connor Campbell, a financial analyst at Spreadex, said sterling "might be in for a bit more movement tomorrow as investors await the latest (likely unchanged) rate vote and statement from the Bank of England".
The Bank's rate decision on Thursday will be its latest since it announced a post-Brexit stimulus package and cut its key rate to a record low of 0.25% in August.
Across Europe, Germany's Dax closed 0.1% lower while the French Cac 40 dropped 0.4%.
In oil markets, Brent crude dropped sharply by nearly 2% to 46.27 US dollars per barrel as enthusiasm over weaker-than-expected US crude oil stock data waned.
In UK markets, the top tier index was lifted by mining stock gains, which were buoyed by news of a rise in lending and money supply growth in China.
It helped push Glencore, Fresnillo, Anglo American and BHP Billiton to the top end of the FTSE 100.
Sky shares fell 1.7% or 214.5p to 824p after announcing plans to invest one million US dollars (£757,000) in The Drone Racing League (DRL), which will see the world of "elite drone racing" hit TV screens .
HSBC shares finished higher despite being slapped with a 2.5 million HK dollar (£243,993) fine by Hong Kong's securities watchdog over regulatory breaches linked to futures contracts dating back to 2014.
Shares were up 1.8p to 561.1p.
On the UK's second-tier stock index, Dunelm shares closed lower by 23p to 892.5p, despite reporting a 6.2% rise in full-year pre-tax profits to £128.9 million, and pledging to press ahead with expansion plans regardless of Brexit.
The biggest gainers on the FTSE 100 included Anglo American up 19.8p to 803.6p, Glencore up 4.4p to 181.45p, RSA Insurance up 11.1p to 509p, and Hikma Pharmaceuticals up 42p to 2141p.
The biggest losers on the FTSE 100 were easyJet down 48p to 1086p, Persimmon down 42p to 1748p, Taylor Wimpey down 3.6p to 149.7p, and Marks and Spencer down 7p to 321.8p.