The FTSE 100 rose to a two-week high on Tuesday, lifted by increasing bets of a larger U.S. interest rate cut and strength in domestic retail shares after an improved forecast from Kingfisher.

The blue-chip index FTSE 100 rose 0.7% to its highest since Sept. 3. The pound eased slightly, relieving some pressure on the index's export-oriented companies.

All major sectoral indexes were in the green, with automobile and retail rising 1.7% and 1.6%, respectively.

The mid-cap index was up 0.2%.

European home improvement retailer Kingfisher led FTSE 100 gains after raising the bottom-end of its profit outlook for the full year, citing improving seasonal category sales trends.

With all eyes on the Federal Reserve's expected first interest rate cut on Wednesday, traders lifted the chances of a larger-than-usual 50-basis-point reduction to 67% from 50% on Monday, as per the CME's FedWatch tool.

The Bank of England also meets this week. Analysts largely expect policymakers to leave rates on hold, so investors will primarily watch for clues on the BoE's path for the rest of the year and updates on the pace of its bond sales.

UK inflation data, due on Wednesday, will also be closely watched for more indications on the BoE's rate path.

Among individual movers, shares of gambling technology firm Playtech rose 0.5% after the company said it will sell its Italian unit Snaitech for 2.3 billion euros ($2.56 billion) to Flutter Entertainment. Flutter shares were up 1%.

Shares of Essentra slumped 24% after the plastic and metal components supplier warned that annual operating profit could miss market expectations due to weaker conditions in Europe and slower recovery in the Americas.

Shares of e-commerce firm THG slipped 2.3% after the company said it was actively looking to facilitate the demerger of its technology services arm. ($1 = 0.8990 euros)

(Reporting by Lisa Mattackal in Bengaluru; Editing by Sonia Cheema)