Sterling rises, gilts fall after hawkish BoE minutes

LONDON Wed Aug 20, 2014 4:50am EDT

LONDON Aug 20 (Reuters) - Sterling rallied on Wednesday, recovering from four-month lows against the dollar, while gilt futures fell after Bank of England minutes showed two policymakers surprisingly voted for an interest rate hike in August.

Martin Weale and Ian McCafferty both unexpectedly voted to start raising interest rates this month, becoming the first officials to do so in more than three years. The voting bolstered market expectations that the BoE could raise rates in five months time.

After last week's Quarterly Inflation Report which was perceived to be dovish by the market, expectations had been pushed out to March.

Sterling rose to $1.6680, up 0.3 percent on the day and bucked the broad dollar strengthening. It hit a four-month low of 1.6602 earlier in the day.

The euro was down 0.5 percent at 79.69 pence, hitting its lowest in a week. The euro had hit a two-month high of 80.37 last week after the Inflation Report.

Gilt futures extend losses. The September contract hit day's low of 112.48, down 50 ticks on day.

Britain's FTSE 100 equity index slightly extended losses after the Bank of England minutes. The index had been down by 0.3 percent before the minutes were published, but then fell further to stand 0.4 percent lower by 0831 GMT. (Reporting by Anirban Nag; Editing by Marius Zaharia)

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