The pound jumped on Wednesday after a Bank of England policymaker said he expected to back an interest rate hike this year while commodity-linked currencies such as the Canadian dollar and Norwegian crown took a hit on declining oil prices.
BoE chief economist Andy Haldane said he was likely to back an increase in interest rates in the second half of this year, which saw sterling surge by almost half a cent, briefly trading above $1.27 and reversing a drop below $1.26 earlier.
Haldane's comments struck a more hawkish tone than BoE governor Mark Carney who in a speech on Tuesday said now was not the time to raise interest rates.
The comments also highlighted a developing split at the central bank, with three out of eight BoE policymakers voting in favour of a rate hike last week.
"The Haldane comments are potentially more significant than the vote last week to the extent that he is firstly a Bank of England insider and secondly he has typically been one of the most dovish members," said Adam Cole, head of FX strategy at RBC Capital Markets in London.
"If his opinion is shifting then that is potentially significant news for rates going forward."