By Helen Reid
The FTSE 100 <.FTSE> was down 0.1 percent by 0825 GMT, with the biggest dollar-earning stocks, miners and oil majors, the worst-performing as sterling gained against the greenback. European stocks <.STOXX> meanwhile were up 0.2 percent.
Weakness in sterling helped the index to its strongest week in 10 months last week but the pound's bounce from lows after the weekend reined in the heavily internationally exposed index.
Analysts said although the inverse relationship between sterling and the FTSE had somewhat loosened in the last weeks, the pound's sharp sell-off last week had brought it back into focus as it drove the equity index higher.
"The FTSE has had a pretty good rally, it's verging on overbought now so it might just be a little bit of short-term weariness," said Ian Williams, economics and strategy analyst at Peel Hunt.
"You can still see reasons to be cautious, but the path of least resistance still seems to be up almost everywhere," he added, pointing to the streak of records in the S&P 500 last week.
Miners Rio Tinto (>> Rio Tinto), Anglo American (>> Anglo American) and Glencore (>> Glencore), among the most exposed to the U.S. dollar, fell back 0.8 to 1.2 percent.
Oil majors BP (>> BP) and Royal Dutch Shell also declined.
Also among top fallers was easyJet (>> EasyJet), down 1.1 percent after HSBC cut its target price on the stock.
Investec analysts highlighted easyJet's slower than expected capacity growth and higher costs, as the market digested the airline's trading update last week.
Gold miners Fresnillo (>> Fresnillo) and Randgold Resources (>> Randgold Resources) were among top gainers as gold prices climbed to their strongest level in more than a week, with renewed concerns over Noth Korea's nuclear ambitions helping safe-haven demand.
The only bright spots on the large-cap index were utilities stocks and consumer staples, defensive sectors investors reach to for their high dividend payouts.
British American Tobacco (>> British American Tobacco) and Reckitt Benckiser (>> Reckitt Benckiser) were among top boosts to the index.
Among mid-caps Millennium & Copthorne Hotels (>> Millennium & Copthorne Hotels plc) soared 21 percent after Singapore's City Developments offered to buy it out in a deal valuing the hotel group at about 1.8 billion pounds ($2.35 billion).
Hochschild (>> Hochschild Mining Plc) and Acacia Mining (>> Acacia Mining PLC) rose 3.9 to 5 percent as metals prices gained.
(Reporting by Helen Reid; Editing by Matthew Mpoke Bigg)
Stocks treated in this article : Millennium & Copthorne Hotels plc
, British American Tobacco
, Anglo American
, Acacia Mining PLC
, Reckitt Benckiser
, Randgold Resources
, Rio Tinto
, Hochschild Mining Plc