LONDON (Reuters) - Sterling jumped and stocks hit session lows on Thursday after the Bank of England said interest rates probably needed to rise sooner and by a bit more than it thought three months ago.
Against the dollar, the pound rose as much as 0.9 percent to hit a day's high of $1.4015 <GBP=> after trading flat before the BoE announcement, in which the bank kept rates unchanged.
Against the euro, sterling rallied more than one percent to hit a one-week high of 87.41 pence (EURGBP=).
Britain's internationally-exposed FTSE 100 (FTSE) hit its session low, down 1.1 percent, after the BoE decision.
The Bank of England said interest rates probably needed to rise sooner and by a bit more than it thought three months ago, after it raised its economic growth forecasts for Britain due to the strong global recovery.
British two-year government bond yields (GB2YT=RR) rose to the highest since December 2015 after the decision, rising by around 6 basis points after the decision to 0.706 percent.
Short sterling interest rate futures <0#FSS:> fell sharply after the decision, dropping around 5 to 7 ticks across 2018 and 2019 contracts and indicating a steeper path of interest rate hikes priced by the market.
(Reporting Tommy Wilkes, Kit Rees and Andy Bruce; Editing by Saikat Chatterjee)