STERLING came under pressure again on Wednesday after official figures showed inflation unexpectedly stalled in June.
The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) rate of inflation held steady at 2.4% as higher motor fuel, gas and electricity prices were offset by deeper discounting by clothing retailers.
Economists were anticipating inflation to rise to 2.6%.
The data raised doubts over a much-anticipated interest rate hike from the Bank of England, knocking sterling, which was down 0.55% against the dollar at 1.303. Against the euro, the pound fell 0.4% to 1.120.
Michael Hewson, chief market analyst at CMC Markets, said the Bank of England may well choose to push ahead with a rate rise next month anyway.
"While some would argue that the weak inflation makes it less likely the Bank will move next month, the fact remains inflation remains above target, and doing nothing could see further sterling weakness, which in turn would put upward pressure on prices," he said.
"As such it is still probable that the Bank of England will push rates higher next month, in the absence of any data or political shocks between now and then."
London's top-flight stocks pushed higher during the session.
The FTSE 100 closed 0.65% or 49.95 points higher at 7,676.28.
European stocks followed the FTSE 100 upwards, with the Cac 40 in France rising 0.46% and the Dax in Germany up by 0.82%.
Oil prices were rising once again after suffering losses towards the start of the week. Brent crude was up 1.5% to $72.642 a barrel in the afternoon.
In UK stocks, easyJet was one of the top risers on the FTSE 100 after it revealed plans to join rivals in launching a legal complaint to the European Commission over crippling air traffic control strikes.
EasyJet, which has suffered a £25 million hit from the disruption, plans to file the legal challenge next week. The airline's shares closed the day 35.5p higher at 1,688.5p.
The under-fire boss of Premier Foods survived a shareholder rebellion that saw 41% vote against his re-election, knocking shares 4.27% or 2p to 44.85p.
A final tally of proxy votes showed that chief executive Gavin Darby scraped by with just 59% of shareholder votes.
The Mr Kipling cakes firm was also left bruised after more than 25% rejected the remuneration report, while chairman Keith Hamill also took a near-26% hit.
Meanwhile, Hotel Chocolat sweetened its share price as it posted double-digit sales growth.
The chocolate specialist's revenue for the year ended July 1 was £116 million, up 12% year on year.
Hotel Chocolat opened 15 stores over the period, which helped lift sales by 6%. Shares closed the session up 4p at 350p.
Bloomsbury shares were knocked 5% or 12p to 230p despite the firm unveiling a rise in sales at it prepares to launch another book from star chef Tom Kerridge in time for Christmas.
Total revenues were up 3.7% for the four months ending June 30, with sales rising by 7.1% in constant currencies.
The biggest risers on the FTSE 100 were Hargreaves Lansdown up 65p to 2,110p, Evraz up 15.6p to 538.2p, BHP Billiton up 44.6p to 1,668.6p and Johnson Matthey up 89p to 3,756p.
The biggest fallers on the FTSE 100 were Smiths Group down 122.5p to 1,627p, Royal Mail down 22p to 467.5p, Ocado down 23.5p to 1,048.5p and GVC Holdings down 17p to 1,090p.
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