The FTSE 100 advanced while the pound recovered ground on Tuesday as investors positioned ahead of crucial UK inflation data due Wednesday. Sterling climbed 0.4% against the dollar to $1.27, paring earlier losses triggered by dovish Bank of England commentary. The blue-chip index gained 0.3%, supported by mining and energy shares tracking higher commodity prices.

Traders await January's Consumer Price Index reading, which will shape expectations for the BoE's next policy move. Markets currently price in roughly 50 basis points of rate cuts this year, though sticky services inflation could delay easing. Meanwhile, UK wage growth data on Tuesday showed signs of moderation, offering some relief to policymakers.

European markets traded mixed as ECB officials signaled patience on rate reductions. The FTSE 250 outperformed with a 0.6% rise, reflecting improved domestic sentiment.