The pound recovered some of the ground lost since the election as UK inflation rose by more than expected.
Inflation rose to 2.9% in May from 2.7% the month before, whereas analysts had forecast no change in the rate.
Sterling climbed back above the $1.27 level, and shortly after midday was up 0.5% at $1.2724. It was also up 0.5% against the euro at 1.1353 euros.
On the stock market, the FTSE 100 share index surrendered early gains to stand almost unchanged at 7,511.95.
Shares in Madame Tussauds and Alton Towers owner Merlin Entertainments fell 2.2% after it said recent terror attacks had led to fewer visitors.
Merlin said the terror attack in Westminster on 22 March led to a “softer domestic, day-trip market”.
“However, the subsequent attacks in Manchester and London over the past month have resulted in a further deterioration in domestic demand and, given the typical lag between holiday bookings and visitation, we are also cautious on trends in foreign visitation over the coming months.”
In the FTSE 250, shares in Capita jumped 13.7% after the outsourcing company reported signs of recovery.
Capita – which issued a number of profit warnings late last year – said it expected profitability to improve in the second half of 2017.