Sterling fell and gilt futures erased losses on Wednesday after minutes from the latest Bank of England policy meeting showed two members had dropped their call for a hike in interest rates.
As a result, investors pushed back chances of the first interest rate hike to around 18 months from now from the 15 months being factored in just a few days ago.
Sterling fell to the day's low of $1.5076, from around $1.5143, down 0.4 per cent. Sterling also fell to 76.805 pence per euro after the minutes from around 76.42 pence per euro beforehand.
British government bond futures erased losses, rising by around 30 ticks and leaving them flat on the day. The premium that 10-year gilts offer over equivalent German Bunds narrowed around 2.5 basis points to 105.5 basis points.
Britain’s blue chip FTSE 100 index extended gains, rising as much as 0.7 per cent having traded up 0.5 per cent prior to the minutes. The index was last up 0.6 per cent at 6,662.50.
Separate data showed the pay of British workers grew faster than inflation again in November, while the unemployment rate fell to 5.8 per cent, its lowest in more than six years and below a forecast of 5.9 per cent in a Reuters’ poll.