The London markets slumped as sterling made its first gains for five days, bouncing back from a two-year low.
The FTSE 100 closed 59.99 points higher at 7,586.78 points at the end of trading on Wednesday.
The value of the pound moved higher against the dollar ahead of the predicted US rate cut, although it dipped against the euro.
Connor Campbell, financial analyst at Spreadex, said: “Somewhat against the odds, the pound rebounded on Wednesday, a lack of good news not preventing the currency from dragging itself away from the week’s multi-year lows.
“This left the FTSE, which received a huge bump from sterling’s panic – alongside Monday’s merger and acquisition action from Just Eat and the London Stock Exchange – in quick retreat.”
The pound was up 0.5% at 1.221 versus the US dollar, and down 0.26% at 1.112 against the euro.
The Dow Jones opened marginally higher as US stocks held steady ahead of the Federal Reserve meeting later on Wednesday, which was expected to reveal a cut to rates.
Michael Hewson, chief market analyst at CMC Markets UK, said: “It’s been another mixed day for markets in Europe, with the FTSE 100 underperforming, this time after a series of disappointing earnings announcements, while the Dax has rebounded after yesterday’s heavy losses.”
The European markets have been supported by whispers that the European Central Bank will be accommodating when it next meets in September.
The German Dax increased by 0.34%, and the French Cac rose by 0.14%.
In stocks, housebuilder Taylor Wimpey saw shares dive after it reiterated warnings over rising build costs as it reported a drop in half-year profits.
The company posted a 9.4% drop in underlying pre-tax profits to £299.8 million for the six months to June 30 as rising build costs took their toll.
Shares in Taylor Wimpey closed 14.75p down at 161.8p on Wednesday.
Elsewhere, Lloyds Banking Group also drifted lower after it reported a 7% fall in half-year pre-tax profits as its bill for the payment protection insurance scandal soared past £20 billion amid a surge in late claims.
It said pre-tax profits dropped to a worse-than-expected £2.9 billion for the six months to June 30 after revealing another £550 million hit from the mis-selling saga in the second quarter.
Shares in Lloyds fell by 1.75p to 53.3p at the close of trading.
GVC Holdings saw shares fall after Ladbrokes Coral Group, the betting firm it acquired in March 2018, was hit with a £5.9 million penalty package for “systemic failings” in its anti-money laundering and social responsibility safeguards.
The Gambling Commission said consumers had been harmed and stolen money had “flowed through the business” due to “unacceptable” shortcomings.
Shares in GVC fell by 16.2p to 591.6p on Wednesday.
The price of oil edged higher, after inventory from the American Petroleum Institute and the Energy Information Administration fell by more than expected.
The price of a barrel of Brent crude oil rose by 0.12% to 65.04 US dollars.
The biggest risers on the FTSE 100 were Next, up 448p at 6,064p, Rentokil, up 22.8p at 435p, Centrica, up 2.5p at 76.08p, and IAG, up 9.6p at 424.4p.
The biggest fallers on the FTSE 100 were Taylor Wimpey, down 14.75p at 161.8p, Fresnillo, down 52.6p at 601p, St James’s Place, down 59p at 984p, and Land Securities, down 29.2p at 796.2p.