The British pound weakened against the dollar after policy minutes from the Federal Reserve boosted the U.S. Currency and traders worried soaring UK inflation would mean higher interest rates and a weaker British economy.
The latest inflation figures, which were released on Wednesday and came in above 10%, increase pressure on the Bank of England (BoE) to bring down prices and also ramp up fears of a sharp economic slowdown.
The pound was down 0.1% against the dollar at $1.204; and earlier fell to $1.1995. Versus the euro, however, it edged up to 84.39 pence .
“The main observation on yesterday was how big the reaction in the rates markets was compared to almost no reaction in sterling,” said Adam Cole, chief currency strategist at RBC Capital Markets.
British two-year government bond yields surged to their highest since November 2008, and stayed close to this level. Sterling fell 0.4% against the dollar after the inflation data release.