The pound has rallied after retails sales in August smashed expectations, boosting the chances of an interest rate rise in November.
Sales in August jumped 1%, their biggest rise in four months, well ahead of expectations of a 0.2% rise.
That pound rose 0.4% against the dollar to $1.356 on the news, as investors priced in the increasing likelihood of the Bank of England raising interest rates in November.
The Bank of England last week primed markets for an interest rate rise 'in the coming months', as inflation continues to run ahead of its 2% target.
'Spending has defied expectations of a slowdown since the Brexit referendum, and currently seems to be holding up despite weak wage growth and above-target inflation,' said Ben Brettell, senior economist at Hargreaves Lansdown.
'This could bode well for economic growth - the UK economy is heavily reliant on the consumer, and economists had expected falling real incomes to eventually translate into weak retail sales.'
But ING economist James Smith said that while August's retail sales jump would embolden hawks at the Bank of England, a cycle of interest rate rises rates was still unlikely.
'It's worth asking where the impetus for any improvement in spending is coming from,' he said.
'While it could be that the household income squeeze has peaked, inflation is still outpacing wage growth. It appears that the near-10% year-on-year rise in consumer credit we've seen this year is still playing an important role, and that doesn't make for a sustainable pick-up in growth.'
The strong pound meanwhile weighed on the FTSE 100, which edged four points lower to 7,271.
Kingfisher (KGF) was the biggest riser, up 4.2%, as the owner of the B&Q and Screwfix chains reported first half profits ahead of expectations, at £440 million.
'Kingfisher saw solid growth at Screwfix and in Poland, offset by continued weakness in France and some business disruption, principally reflecting product availability and clearance,' said Russ Mould, investment director at AJ Bell.
'But the group is on track to achieve its strategic milestones for the current financial year.'