The pound slumped against the US dollar as higher US inflation raised expectations about a coming interest rate hike in the world's biggest economy.
Sterling shed two cents versus the greenback to just under 1.55 while in shares the FTSE 100 Index had another uneventful session, climbing 18.2 points to 7031.7.
The pound gave up all its gains from the previous session when it had been boosted by a better than expected performance from UK retail sales.
It was also lower against the euro, dropping a cent to 1.40 as the single currency fought back after being driven to recent lows by fears over the Greek debt crisis.
In equities, the FTSE 100 completed a week in which it had made small gains every day but still finished only about 70 points higher than the close last Friday.
Sentiment was underpinned by hopes over stimulus in China amid signs of a slowdown in the world's second biggest economy. But France's Cac 40 was flat and Germany's Dax lower.
In the US, core inflation excluding food and energy posted its highest rate in more than a year in April, suggesting that an improving U.S. economy is starting to lift prices.
It could prompt the Federal Reserve to start raising interest rates later this year. In New York, the Dow Jones Industrial Average fell.
In London, mobile phone giant Vodafone led the risers' board as it continued to be boosted by persistent takeover talk suggesting it could be a target for America's Liberty Global, as well as positive broker comments.
Liberty boss John Malone was recently reported as saying the two firms would be a "great fit". Shares rose nearly five per cent, or 11.2p to 253.8p.
Meanwhile, building materials firm Travis Perkins, which also owns DIY chain Wickes, was higher after Jefferies upgraded its rating on the stock from underperform to buy as the broker took a more positive view of the sector.
Travis improved 32p to 2208p. FTSE 250 listed kitchen supplier Howden Joinery also received an upgrade from Jefferies, helping it add 7.5p to 508p.
In banking, HSBC was ahead after confirming that it was exploring options, including sale, for its operations in Brazil. The stock added 6.1p to 620.6p.
Elsewhere, Whitbread's decision to appoint Lloyds Banking Group retail chief Alison Brittain as its next chief executive after the retirement of Andy Harrison failed to impress investors.
Richard Baker, chairman of the Premier Inn to Costa coffee group, said it had become "bigger and better" under Mr Harrison and that the new boss's arrival "will ensure Whitbread continues to get even better still". But shares fell by one per cent, or 50p to 5210p.
The biggest FTSE 100 Index risers were Vodafone up 11.25p at 253.75p, Travis Perkins up 32p at 2208p, Dixons Carphone up 6.5p at 468p and Randgold Resources up 66p at 4779p.
The biggest FTSE 100 Index fallers were International Airlines Group down 11.5p at 542.5p, TUI down 24p at 1180p, BT down 8.1p at 451.05p and Antofagasta down 11p at 774p.
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