Sterling rallied against the dollar on Wednesday, as the greenback's steep decline against all major currencies overshadowed the release of minutes from the Bank of England's last policy meeting.
Analysts were surprised by the minutes, which showed two of the nine policymakers opposed this month's interest rate rise. David Blanchflower was expected to vote against the hike to 5.25 percent but he was joined unexpectedly by Rachel Lomax.
Yet the minutes failed to stymie talk of another rate hike in February, with recent strong data from the housing market and industrial sector still leaving the door open for more tightening, analysts said.
"The tone of the (minutes) text representing the majority viewpoint was hawkish, playing up upside risks from house prices, pay growth, and monetary/nominal indicators, but playing down the chances of a sharp US growth slowdown," Lehman Brothers said in a note to clients. "All in all, we remain comfortable with our judgement that there are enough upside risks to the Bank's central projection for inflation to justify a further rate hike in the new year."
The dollar's broad decline quickly became the focus of currency trading and by 1530 GMT sterling was up 0.9 percent against the dollar at $1.9160, recovering from $1.9033 just after the minutes were released.
Sterling was within 20 ticks of making a fresh 18-month high against the dollar, and on Wednesday posted its biggest one-day rise against the greenback in almost four months. The euro was down about 0.1 percent against sterling at 67.56 pence. Meanwhile, sterling was also supported by merger and acquisition news on Wednesday.
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