CURRENCIES: British Pound Slides To 2-month Low As Rate-hike Hopes Fade

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Dollar mixed versus major rivals

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The pound dropped to a two-month low versus the dollar on Tuesday, dropping below $1.27 level after Bank of England Gov. Mark Carney ruled out an imminent rate increase.

Sterling tumbled to $1.2621, plumbing levels last seen on April 17, after trading as high as $1.2758 earlier in the session. It traded at $1.2738 late Monday in New York.

The selloff came after Carney in his Mansion House speech said, (http://www.marketwatch.com/story/boe-chief-carney-too-early-to-lift-interest-rates-2017-06-20) "now is not yet the time" to begin tightening monetary policy. After data last week showed U.K. inflation had soared to 2.9% in May, investors started to speculate about when the central bank would step in to control rising consumer prices. Sterling started rising against the dollar after that inflation data, topping the $1.28 level.

"Carney's warning that 'now is not the time' to tighten should hardly be a surprise, given his record of favoring looser monetary policy, but it does reiterate the MPC's preference for looking through the current high levels of inflation for the time being," said Neil Wilson, senior market analyst at ETX Capital, in a note.

At the BOE's Monetary Policy Committee meeting last Thursday, three out of eight members unexpectedly voted in favor of a rate hike. Economists had only expected one policy maker to favor an increase.

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"Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase. But all expect that any changes would be limited in scope and gradual in pace," Carney said in his speech at Mansion House Tuesday morning.

"Whatever happens, monetary policy will be set to return inflation sustainably to target while supporting as best it can the necessary adjustments in the economy," he added.

In other currencies, the euro fell to $1.1125 from $1.1150 late Monday.

The yen gained ground, with the dollar buying Yen111.44 compared with Yen111.53 on Monday.

The ICE Dollar Index was up 0.3% at 97.806.

(END) Dow Jones Newswires

June 20, 2017 12:47 ET (16:47 GMT)