Sterling hits two-and-a-half year high versus dollar

The sharp drop in the UK unemployment rate and mounting expectations of a 2014 rate hike pushed sterling to a two-year high versus the US dollar in morning trading.

Yesterday's drop in the official unemployment rate to 7.1% sparked renewed forecasts of an interest rate rise after it moved within a whisker of new Bank of England Governor Mark Carney's 7% threshold. Carney said last August the Bank would not even consider raising interest rates unless unemployment fell below 7% and, although it remains only a single factor in the decision, the fall in the jobless figure has prompted speculation there could be a move sooner than expected. Some commentators now forecast a rate increase at the tail end of this year, although most are predicting a rise...