The value of sterling has risen through the two-dollar level for the first time in 15 years after inflation showed a surprise jump.
The data boosted expectations that at least one more interest rate rise will be needed to curb inflation, pushing the pound briefly above the psychological $2 level for the first time since September 1992.
The Office for National Statistics said today that consumer prices leapt 0.5 per cent on the month, lifting the annual rate of inflation to 3.1 per cent - the highest since the series began in January 1997.
Analysts had forecast a steady annual reading of 2.8 per cent.
The inflation report came the day after data showed factory gate inflation had also accelerated unexpectedly in March.
The inflation data required the Bank of England to write a letter of explanation to the British government.
The central bank has a 2.0 per cent target for inflation and must write an open letter to the government should inflation deviate more than one percentage point from this level.