Sterling fell on Thursday after the Bank of England followed its counterparts in the United States and euro zone with a hefty hike in interest rates. As widely expected, the BoE increased rates by 50 basis points to 1.75%, its sixth increase since December but the biggest since 1995.

"The main surprise seems to be the somewhat downbeat economic forecasts," says Stuart Cole, head macro economist at Equiti Capital. "That is somewhat worse than what we had seen in May, where the outlook was for one or two difficult quarters of low or negative growth, and then a recovery," he says.

British gilt yields fall sharply, with euro zone bond yields extending their fall after the BoE statement. S&P 500 futures were firmer ahead of Wall Street's open and the latest jobless claims data. Asian shares recovered some of Wednesday's losses driven by tension over Nancy Pelosi's visit to Taiwan.

Shares in Hong Kong rose 2%, tracking broader gains in Asia. French bank Credit Agricole joined the growing roster of better-than-expected earnings. Oil prices stabilised after hitting six-month lows. U.S. Federal Reserve officials pushing back against suggestions they will slow the pace of interest rate hikes.

Eurozone consumers bracing for high inflation to continue, says European Central Bank. Kasper Elmgreen, head of equities at asset manager Amundi: "The big picture here is that it's going to require quite a lot to restore price stability" "The illusion that decades-high inflation would be transitory was now firmly gone," he says.
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