Sterling jumped as much as 1.3% against the dollar after the Bank of England said interest rates probably needed to rise sooner and by a bit more than it had previously thought because of the strength of the global economy.

Interest rate futures now project a 60% chance of a Bank of England rate hike in June and fully price in an increase in August meeting.

Before the Bank of England announcement, in which the bank also raised its UK economic forecasts, markets had priced in a 50% chance of a rate hike by May.

The central bank's Monetary Policy Committee raised interest rates for the first time in a decade in November. The Bank of England voted unanimously to keep rates on hold at 0.5% on Thursday but Governor Mark Carney and colleagues saw a growing need to move faster on raising rates to keep a grip on inflation.

"This is a Brexit-contingent hawkish signal," said Viraj Patel, an FX analyst at ING in London.

"The comment in itself was the surprise. That was a clear message from the bank that the (interest rate) curve was a little too flat for their liking."

The pound rose to a day's high of $1.4067 after trading flat before the Bank of England announcement.

It later gave up much of those gains and was at $1.3942 at 1635 GMT as a broader sell-off in markets in late European trading hit sterling.