The pound jumped against the dollar this afternoon, after the Bank of England gave a hawkish signal that rates would be hiked earlier than previously indicated.
The Bank held the interest rate at 0.5 per cent but the MPC said monetary policy will “need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated”.
Sterling was up 0.86 per cent against the dollar, to hit $1.40, after the notes of last month's MPC meeting were published.
The pound was also up one per cent against the euro, hitting €1.1424.
"The pound has spiked sharply higher following the latest BoE rate decision despite the MPC voting unanimously to keep rates on hold at 0.5 per cent. The strong move is largely due to a comment in the accompanying statement which said that the bank may need to raise rates earlier and faster than they forecast back in November," said David Cheetham, chief market analyst at XTB.
"The appreciation in sterling is particularly bad for stocks and the blue-chip index could be set for some more downside ahead given these adverse FX moves and the fragile global backdrop for equities of late given the rapid recent declines."