The blue-chip FTSE 100 index ended 0.05% lower, with large dollar earners, including Unilever, British American Tobacco and Diageo Plc down between 0.4% and 1%, hit by sterling's strong gains. [GBP/]

Limiting further losses were precious metals miners and oil stocks on the back of firmer commodity prices.

"The markets are now in a bit of a wait-and-see mode following central bank decisions last week and as they look ahead for more data to judge global economic recovery with the overall bullishness for equity markets and a strong outlook for global economic growth remaining intact," said David Madden, an analyst at Equiti Capital.

The FTSE 100 has gained around 13% so far this year and has recovered from its pandemic-driven losses supported by dovish central bank policies, robust quarterly results and reopening optimism.

However, the index still underperformed its European peers, which have gained around 21% year-to-date, over lingering concerns of rising input costs affecting the pace of economic recovery.

The domestically focussed mid-cap index was down 0.1%, dragged by weakness in travel and leisure shares.

Travel and leisure stocks fell 1.2%, with IAG, Flutter Entertainment, Entain among the top drags on FTSE 100.

Playtech Plc rose 2.4% after it received a takeover offer from its second-biggest shareholder, Gopher Investments, on Sunday.

British defence company BAE Systems slipped 0.5%, even after it stuck to its guidance for earnings to grow by 3% to 5% this year over 2020's result, and said demand for its products and services remained high.

Abrdn Plc jumped 3.6% after Sky News reported on Saturday the British asset manager was in advanced talks to buy Interactive Investor, an online investment service, for more than 1.5 billion pounds ($2.02 billion).

(Reporting by Shashank Nayar and Amal S in Bengaluru; Editing by Subhranshu Sahu, Shailesh Kuber and Andrew Heavens)

By Shashank Nayar