Investing.com - Sterling weakened against the dollar on Tuesday after testimony to parliament’s Treasury Committee by Bank of England officials reinforced the dovish message of its November inflation report.
GBP/USD was down 0.28% to 1.5660, within striking distance of last week’s 14-month trough of 1.5588.
The pound came under pressure after BoE Governor Mark Carney said the U.K. faces heightened risks from geopolitical tensions and slowing global growth, noting that economic conditions have deteriorated in the euro zone and Japan in recent months.
Carney said it is “more likely than not” than U.K. inflation will fall below 1% in the next few months. However the BoE expects inflation will move back towards its 2% target in the medium term, as salary growth picks up.
The BoE chief reiterated that when interest rates do start to rise they will do so in a gradual and limited way.
Markets pushed back expectations for a U.K. rate hike to the autumn of next year after the bank’s November 12 inflation report warned that downside risks to inflation remain and added that the rate of economic growth in 2015 is likely to be slower than this year.
The pound dipped against the euro, with EUR/GBP edging up to 0.7931.
In the euro zone, data on Tuesday confirmed that Germany narrowly avoided a recession in the third quarter, posting economic growth of 0.1%. Consumer spending rose by 0.7%, while exports were 1.9% higher.
The Organization for Economic Co-operation and Development warned Tuesday that the euro area is at risk of deflation if growth stagnates or if inflation expectations continue to deteriorate.
It repeated its call for the European Central Bank to embark on quantitative easing measures to spur growth in the region.