Sterling surges to highest in a year on Bank of England rate hike warning

Sterling jumped after the Bank of England warned it could raise interest rates for the first time in a decade in the coming months while the dollar rose after above-forecast inflation data that could allow the Federal Reserve to hike for a third time this year.

Wall Street was set to open lower, index futures showed after the inflation data. Earlier, weak Chinese data had weighed on European and Asian shares and pulled an MSCI measure of world stock prices down from record highs hit on Wednesday.

Britain's blue-chip FTSE 100 share index fell sharply after the BoE warning, which followed a monetary policy meeting, and was last down 0.7 percent at a two-week low.

Policymakers kept rates unchanged at a record low 0.25 percent but warned a hike was likely to be needed in coming months if the economy keeps growing and inflationary pressures continue to build.

Britain's vote last year to leave the European Union has raised doubts about the long-term health of the economy and strong short-term inflationary pressures.

Sterling rose to as high as $1.3358, adding a cent and a half to touch its strongest in more than a year, and to 89.11 pence per euro after the decision.
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