STERLING hit a seven-week high against the US dollar on Monday following a rebound in the UK services sector.
The pound rose as high as 0.4 per cent against the US dollar on the back of the news to around 1.336 US dollars before settling closer to 1.331 in the afternoon.
The FTSE 100 closed down 15.18 points to 6879.42, as falls from Britain's banking giants weighed heavy on London's top flight.
Royal Bank of Scotland and Lloyds Banking Group were some of the biggest fallers on the FTSE 100, following downgrades from Deutsche Bank.
RBS was was the biggest loser, down 7.2p to 197.1p. Lloyds finished 1.3p lower at 59.65p.
Fresh economic data showed Britain's powerhouse services sector rebounded in August, with output beating expectations and marking a return to growth following July's shock contraction.
The closely-watched Markit/CIPS services purchasing managers' index (PMI) showed a reading of 52.9 in August, up from 47.4 in July and above economists' expectations of 50.0.
A reading above 50 indicates growth.
Sterling initially rose 0.3 per cent against the euro at 1.194 euro, and later settled near 1.193.
Jasper Lawler, a market analyst at CMC Markets said: "The rebound in services shows it was business confidence in the resiliency of the UK economy that was a significant driver of the turnaround in manufacturing, and not just the devalued currency."
With the UK's services sector back in expansion, Mr Lawler said the Bank of England will have a harder time justifying their post-Brexit stimulus package, which saw the key interest rate cut to a fresh low of 0.25 per cent in August.
Across Europe, the Germany's Dax ended 0.11 per cent lower, while France's Cac 40 closed down 0.02 per cent.
In oil markets, Brent crude spiked on news that Saudi Arabia and Russia would issue a statement that would call for cooperation to support oil prices. Brent crude was up two per cent at 47.55 US dollars per barrel.
In UK stocks, supermarket chain Morrisons saw its shares step up, finishing 0.95 per cent higher or 1.88p at 198.88p, following news of further price cuts on meat products at its UK stores.
The move marks Morrisons' second post-Brexit price reduction after cutting prices on more than 1,000 products by an average of 18 per cent at the start of August.
Elsewhere in the retail sector, Marks & Spencer fell by 1.1 per cent or 4p to 350.1p, after announcing that it would axe 525 jobs at its head office in a bid to cut costs.
The company said 400 permanent staff from its central London office will be relocated, with a number of IT and logistic roles moved to operations in Hemel Hempstead in Hertfordshire, and Middlesex.
A number of London-listed miners benefited from upbeat Chinese services PMI data, which rose from 51.7 in July to 52.1 in August.
Anglo American rose 5.93p to 813.93p and BHP Billiton finished higher by 8.41p at 1003.91p.
The biggest risers on the FTSE 100 were Paddy Power up 169.2p to 9184.2p, CRH up 41.8p to 2578.8p, Randgold Resources up 123.5p to 7588.5p, and BAE Systems up 7.5p to 55.5p.
The biggest fallers on the top-tier index were RBS down 6.1p to 198.2p, Provident Financial down 72p at 3028p, Intu Properties down 7.1p to 305.3p, and Berkeley Group down 42.2p to 2706.8p.
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