UK policymakers surprised markets by lifting the benchmark interest rate to 5% in a bid to bring inflation down toward the BoE's 2% target.
The dollar fell after March inflation cooled to 5%, a reading that could put a Fed rate hike 'in a bit of jeopardy," says one analyst.
The UK's Consumer Price Index rose 10.4% last month, up from 10.1% in January and way clear of the figure expected by economists.
Finance minister Jeremy Hunt unveiled a new budget as the UK battles to rebuild its economic credibility and tame soaring inflation.
Inflation in October would have been almost 14% if the UK government hadn't put a price cap on household energy bills, the ONS said.