LONDON, July 2 Reuters Sterling hit fresh twomonth lows against the dollar on Friday, pressured in the wake of dovish comments from the Bank of Englands governor.
In his annual Mansion House speech on Thursday, Andrew Bailey said it was important to ensure that the recovery was not undermined by a premature tightening in monetary conditions, as a rise in inflation was likely to be temporary.
Baileys comments knocked the pound to its lowest since April 16, and the currency hit a fresh low of 1.3745 in morning deals in London.
Against the euro, it recovered some ground to trade 0.2 higher at 85.94 pence.
The pounds recent bout of outperformance faltered yesterday as BoE Governor Bailey said that the BoE should not overreact to the inflation spike, said ING in a note to clients. Sterling looks a little vulnerable to a further BoE repricing short term and eurosterling could see a decent rally if resistance break at 0.86.1015 pence.
ING noted that unlike U.S. interest rate futures markets, sterling markets are in the process of handing back hawkish pricing seen in late June.
Money markets were earlier pricing a 10 basis point BoE rate hike in May 2022.
Sterling was one of the worstperforming G10 currencies last week after the BoE kept the size of its stimulus programme unchanged and said inflation would surpass 3, but that the climb further above its 2 target would be only temporary.
The pound found some support against the euro this week on the European Union…