Sterling jumped, UK gilts tumbled and British stocks briefly slipped on Thursday after the Bank of England expanded its quantitative easing programme by 25 billion pounds, allaying some concerns about a bigger increase.

Euro zone government futures hit a session low, taking a cue from the sell-off in UK goverment debt.

The BoE also left interest rates unchanged at a record low of 0.5 percent, as expected.

Two-thirds of analysts had predicted the BoE would expand its asset-buying scheme, but opinion had been split on whether the increase would be 25 billion or 50 billion pounds.

Sterling GBP=D4 jumped more than a full U.S. cent to $1.6620, hitting its highest in two weeks.

The euro EURGBP=D4 fell more than half a pence to the day's low of 89.33 pence.

The December gilt future FLGZ9 tumbled more than 50 ticks to stand at 116.49 by 1206 GMT, having stood at 117.31 ahead of the decision.

The 10-year gilt yield shot up more than 7 basis points to 3.86 percent, testing its highest level in three months.

Short sterling futures <0#FSS:> plummeted to stand between one and three ticks lower across the strip, having been as much as eight ticks higher beforehand.

Britain's FTSE 100 .FTSE slipped slightly immediately after the decision, but recovered to levels seen just before the announcement. The index was down 0.6 percent by 1204 GMT at 5,078.45.

The December 10-year Bund future FGBLc1 marked a session low of 121.02 after the BoE news and was last seen down 19 ticks on the day at 121.06.

Bunds played catch-up with UK gilts, as the 10-year yield spread widened by eight basis points to 52 bps GB10YT=RR EU10YT=RR.

Late 2010 Euribor futures contracts pared gains after the BoE announcement. The Sept 2010 contract FEIU0 and was last seen up 0.5 bps at 98.385.