LONDON, June 21 (Reuters) - Sterling surged by around half a cent on Wednesday, briefly trading above $1.27 after Bank of England Chief Economist Andy Haldane signalled he would weigh in behind a rise in interest rates in the second half of this year.
Haldane's comments ran contrary to those of Governor Mark Carney, who drove the pound lower on Tuesday by saying "now was not the time" to begin to raise interest rates and sparked a surge in bets on a rise in rates within the next year.
Short sterling contracts for December of this year reversed all of their gains since Carney's speech, pricing in a greater than 50 percent chance of the Bank raising rates by then. British gilt futures shed around 25 ticks and government bond yields hit session highs.
The pound rose as high as $1.2704 before settling 0.4 percent stronger on the day at $1.2684. Against the euro it gained just over a third of a percent to 87.83 pence per euro.
The UK's blue chip FTSE 100, which tends to fall as sterling rises, hit a session low and was last down 0.5 pct, as were British mid cap stocks which fell further to trade 0.5 percent lower. (Reporting by Patrick Graham, Ritvik Carvalho, Andy Bruce and Kit Rees)