THE pound was knocked amid fresh political turmoil on Tuesday as Theresa May attempted to avoid defeat on key Brexit legislation.
Sterling fell below $1.32 despite solid employment data pointing to a likely hike in interest rates from the Bank of England next month.
According to the Office for National Statistics, the number of people in work reached new record levels, while earnings remain "modestly" up on the year.
Employment increased by 137,000 in the quarter to May to 32.4 million, while nominal average earnings increased by 2.5% year on year in the March to May period.
However, political pressures steered the pound, which was down by 0.66% against the US dollar at 1.314 in afternoon trading. Against the euro, sterling was down 0.3% at 1.126.
Michael Hewson, chief market analyst at CMC Markets, said: "The pound has come under pressure today despite the latest unemployment and wages data keeping the prospect of an August rate rise very much on the table.
"Once again politics has played into the weakness over concern that the government may face defeat on its latest Brexit bill amendment, as concerns grow that Prime Minister May might face a leadership challenge."
The FTSE 100 closed the day up 0.34% or 25.88 points at 7,626.33 after suffering losses on the back of falling oil prices on Monday.
On the continent, France's Cac 40 was up 0.22%, while the Dax in Germany climbed 0.87%.
Oil prices were relatively stable after sliding 3% during Donald Trump's visit to Helsinki on Monday. Towards the end of the session, Brent crude was up 0.15% at $71.890 a barrel.
In UK stocks, TalkTalk's shares jumped 8% after the firm posted rising first quarter sales, and said it will bag 150,000 new customers this year as it ploughs on with its turnaround.
The telecoms group booked a 4.1% increase in first quarter revenue to £382 million, helped by strong growth in its broadband customer base, which saw 80,000 net additions, taking the total to 4.2 million.
By the market close, Talk Talk's shares were 8.8p higher at 118.7p.
Royal Mail warned that firms were uncertain over the recent shake-up of personal data rules, but its shares were lifted 8.7p to 489.5p as it continued to see a buoyant parcels business offset by falling letter deliveries.
The group reported a 7% fall in letter revenues in the three months to June 24, while UK parcel revenues rose 6%.
British Land, which owns and manages a range of commercial properties, said retail administrations and restructurings through CVAs had cost the firm 1.6% of its total group rent since April 1.
In a statement ahead of its annual general meeting, British Land said the retail market "remains challenging", but that it was well-placed to deal with the upheaval in the sector. By the end of play, shares were down 5.6p to 646.2p.
Sales at Dairy Crest were given a boost by the outperformance of key brands Cathedral City and Clover in the first quarter, despite challenging market conditions, lifting the firm's shares by 15.6p to 484.2p.
The group said combined revenues for Cathedral City, Clover, Frylight and Country Life grew 6% in the three months to June 30.
The biggest risers on the FTSE 100 were Just Eat up 23.2p to 871p, Berkeley Group up 91p to 3,685p, Antofagasta up 20.8p to 958.8p and Mondi up 44p to 2,079p.
The biggest fallers on the FTSE 100 were Paddy Power Betfair down 275p to 8,225p, WPP down 36p to 1,180p, Barclays down 3.16p to 188.36p and CRH down 38p to 2,680p.
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