The pound tumbled to an eight-month low against the euro after European Central Bank (ECB) president Mario Draghi signalled potential changes to its bond buying programme could be discussed in the autumn.
The news sent the euro soaring, knocking the pound down 1.3% to trade at 1.116 against the European currency, marking its lowest point since early November.
Sterling was also in the red versus the US dollar, down 0.3% at 1.298.
Investors have been closely watching the ECB for any news of monetary policy tightening, which would signal growing confidence in the eurozone economy.
Neil Wilson, a senior market analyst at ETX Capital, said: "Draghi offered precious little new but what he did let slip is that the Governing Council is likely to discuss tapering in the autumn."
He added: "Whether September counts as the autumn, Draghi was less willing to comment on.
"It wasn't much but the market is super-sensitive to anything from Draghi at the moment."
The drop in the pound sent the FTSE 100 higher by 0.77% or 59.96 points to 7,487.87.
London's blue chip index easily outperformed its European counterparts, with the French Cac 40 ending the day down 0.3% while the German Dax fell flat.
In oil markets, Brent crude prices were flat around 49.58 US dollars per barrel, having retreated from near-six week highs that were spurred by data showing a bigger than expected drop in US energy inventories a day earlier.
In UK stocks, Unilever shares rose 75p to 4,389p after the consumer goods giant said pre-tax profits climbed 27% to 4.6 billion euro (£4.1 billion) for the first half of 2017, as efforts to boost profitability gathered pace despite volatile market conditions .
EasyJet tumbled 84p to 1,334p. While the budget airline upgraded its annual forecast following a 16% rise in third quarter sales, its full-year profits are still expected to fall below last year's £495 million, when the firm was stung by the plunging pound.
Sports Direct shares surged 34.4p to 335.1p despite reporting a 59% drop in annual profits linked to the pound's collapse, as investors put faith in its new store format and said current year earnings are expected to grow by up to 15%.
Premier Foods jumped 1.25p to 40p despite reporting a 3.1% drop in first quarter revenue, after a combination of warm weather and lacklustre dessert sales dragged on its performance.
Mothercare shares slumped 2p to 101p after its first quarter results showed a 8.3% plunge in international sales, once the effects of the Brexit-hit pound were stripped out.
Moneysupermarket fell 9p to 350.4p as the company warned profits would come in at the lower end of expectations following a slowdown in energy switching.
The biggest risers on the FTSE 100 were Ashtead Group up 51p to 1,710p, Provident Financial up 71p to 2,390p, Next up 103p to 3,783p, and British American Tobacco up 137p at 5,425p.
The biggest fallers on the FTSE 100 were EasyJet down 84p at 1,334p, International Consolidated Airlines Group down 24p at 595p, Anglo American down 32.5p at 1,100.5p, and Shire down 82.5p at 4,080.5p.