Sterling scaled new heights against the yen on Wednesday, and also gained on the dollar and euro, after Bank of England minutes ran counter to analysts' forecast and hinted that a rate hike could come as soon as July.
BoE Governor Mervyn King and three other Monetary Policy Committee members opposed keeping interest rates static at 5.5 percent, but were outvoted by the remaining five members, a departure from what was predicted by some to be near unanimity.
"The knee-jerk reaction was sterling positive, because the vote was seen as a hawkish surprise," said David Simmonds, head of foreign exchange strategy at Royal Bank of Scotland. "But the actual text of the minutes read a little bit less hawkishly than the vote itself, and markets started to see this in the interest rates future curves," Simmonds said.
Sterling rose 0.20 percent to hit 2-week highs at $1.9941, while against the yen the pound streaked to a new 15-year high of 246.36 yen at 1425 GMT. The pound was trading against the euro at 67.32 pence, its second-highest since early March.
Front month British futures were down from 3 to 6 ticks but back month short sterling contracts were as much as 3 ticks higher on the day, as investors reckoned the BoE minutes did little to change the view that rates were near their peak.
A Reuters poll of 64 economists taken after the minutes' publication showed rates rising to 5.75 percent in July and gave a median 40 percent chance of them reaching 6.0 percent this year, up from a 30 percent chance in early June.
"Our view ahead of these minutes was that the Bank of England would wait until August before hiking, but taking these minutes at face value we would have to accept that there is now a greater than 50 percent chance that the move will come at the July meeting," Calyon said in a note to clients.
Separately, data from the British Bankers' Association showed that underlying net mortgage lending in Britain rose by its largest amount for six months in May, while building society lending eased on the year.
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