Sterling fell to a 10-month low against the euro on Tuesday as weaker-than-expected UK inflation data weighed on the currency.
The pound was down 0.4% against the eurozone currency at 1.096, marking its lowest level since October last year.
It comes after official UK inflation figures for July fell short of consensus estimates at 2.6%.
Connor Campbell, a financial analyst at SpreadEx, said: "While, at 2.6%, inflation is still troublesome - especially since wage growth is lurking around the 1.8% mark - it nevertheless wasn't as high as the expected 2.7%.
"More importantly, it's a decent way away from the 2.9% reading seen in May.
"And given that the Bank of England didn't pull the rate hike trigger at that level, they're not going to do it for anything lower, helping to explain why the pound found itself in such a bad mood once the figure was released."
Sterling also fell to a five-week low against the US dollar, down 0.7% at 1.286. The move was also influenced by strong US retail figures, which bolstered the greenback.
Overall, the weaker pound supported the FTSE 100 which ended the day up 0.4% or 29.96 points at 7,383.85.
It outperformed its European peers, with the French Cac 40 up 0.36% and the German Dax ending the day up 0.1%.
Brent crude prices fell 0.7% to 50.20 US dollars per barrel as weak industrial production data from China released earlier this week sparked concerns about falling oil demand.
In UK stocks, RBS shares rose 3.5p to 263.1p as the bank confirmed that more than 800 IT jobs were at risk as part of a major reorganisation plan aimed at making RBS a "simpler, smaller bank" that will see its technology needs "reduce over time."
Amec Foster Wheeler fell 7.9p to 427.6p after offering to sell off a number of assets as part of attempts to allay UK competition concerns over its proposed £2.2 billion takeover by Wood Group.
Wood Group shares also dropped 14.5p to 586.5p.
Revolution Bars jumped 7.5p to 181.5p after the nightclub operator - which is already the subject of a £100 million takeover tilt from Slug And Lettuce owner Stonegate - rebuffed a merger proposal from rival Deltic Group.
Mears tumbled 36.75p to 448.25p amid news that the Grenfell Tower tragedy would hit profits at the social housing and support service provider, as its clients delay new projects.
Laura Ashley ended the day down 2p at 9p after the homeware and fashion retailer issued its second profit warning in six month, sparked by a £2.8 million hit on the back of a revaluation of one of its freehold properties.
The biggest risers on the FTSE 100 were easyJet up 57p at 1,322p, International Consolidated Airlines Group up 18p to 631p, BAE Systems up 13.5p to 594p, and Old Mutual up 4.5p at 202p.
The biggest fallers on the FTSE 100 were Provident Financial down 74p at 1,882p, Randgold Resources down 235p at 7,200p, Fresnillo down 46p at 1,501p, and Next down 124p at 4,271p.
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