Testimony from the Bank of England governor which played down talk of an early interest rate rise reversed some of the pound's gains yesterday.
The FTSE 100 Index was also 13.5 points lower at 6787.1, having ended a four-day winning streak during trading yesterday.
The decline meant that traders only got a short-lived boost from encouraging manufacturing figures from overseas.
Sterling was lower against the dollar, at 1.70, and the euro, at 1.25, after Bank of England governor Mark Carney appeared to talk down the prospect of imminent interest rate rises. Giving evidence to the Treasury Select Committee, Mr Carney said there seems to be "more spare capacity in the labour market than we previously had thought".
IHS Global Insight chief European economist Howard Archer said Mr Carney wants firms and households to understand that "while interest rates cannot stay down at 0.5% for a whole lot longer, they will not rise nearly as quickly or as far as in past tightening cycles."
The dollar was also boosted by sales of new US homes which rose more-than-expected in May to the highest level in six years.
Oil giant BP featured on the risers board, up 3.9p to 523.9p, while rival Royal Dutch Shell was 4p higher at 2433.5p.
Despite the recent spike in oil prices and this week's strike by air traffic controllers in France, airline stocks were on the front foot after a difficult few days. easyJet was the highest riser on the top flight leaderboard up 56p at 1479p and British Airways owner International Airlines Group lifted 6.9p to 386.8p.
In corporate news, Carpetright shares were nearly 1% lower despite chairman Lord Harris insisting the retailer was on track for a better year.
Results yesterday showed a fall in underlying profits to £4.6 million but with a store refresh programme well under way Lord Harris said there was hope for an improved performance. Shares fell 4.8p to 494.3p.
Barcode-printer maker Domino Printing Sciences was the biggest faller on the FTSE 250 leaderboard after it cautioned that pricing pressure in Asia and other developing markets coupled with increased research and development expenses would weigh on earnings for the next year. Shares fell nearly 17% or 125.5p to 615p.
Speciality chemicals firm Croda International was another big faller in the FTSE 250 Index after it warned that second-quarter profits will be down 8% on the previous quarter due to sterling's strength. Shares fell 218p to 2188p.
The biggest risers on the FTSE 100 were easyJet up 56p to 1479p, Shire up 101p to 4404p, International Airlines Group up 6.9p to 386.8p and British Land up 11p to 687p.
The biggest fallers on the FTSE 100 were Ashstead Group down 27p to 827p, Sports Direct International down 22.5p to 720p, Weir Group down 78p to 2619p and RSA Insurance down 14p to 482.2p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article