- The pound fell to two-week lows against the dollar on Tuesday after Bank of England Governor Mark Carney indicated that there is leeway for the bank to leave rates on hold for longer.

GBP/USD hit 1.6597, the lowest since February 24 and was last down 0.20% to 1.6610.

Cable was likely to find support at 1.6550 and resistance at 1.6685.

During testimony to parliament’s Treasury Select Committee on Tuesday, Carney said the amount of spare capacity in the economy was probably slightly higher than 1.5% of gross domestic product, indicating that the economic recovery can continue without pushing up inflation.

He added that there was a range of views among the bank’s monetary policy committee members on the amount of spare capacity in the economy.

Carney also reiterated that when rate increases do come they will be gradual.

Sterling has strengthened against many of the other main currencies in recent months, amid expectations the BoE could raise rates ahead of other central banks.

Earlier Tuesday, data showed that U.K. manufacturing output rose more than expected in January, but bad weather hampered the broader measure of industrial output.

Manufacturing production rose 0.4% in January, the Office for National Statistics reported, above expectations for a 0.3% gain, while December’s figure was revised up to a 0.4% increase from a previously reported gain of 0.3%.

On a year-over-year basis, manufacturing production rose 3.3%, up from 1.4% in December.

Industrial output rose 0.1% in January, slowing sharply after a 0.5% increase in December and was up 2.9% from a year earlier. Analysts had expected industrial output to rise 0.2% in January.

Elsewhere, sterling was little changed against the euro, with EUR/GBP inching up 0.01% to 0.8340.

The pair briefly dipped to session lows earlier after European Central Bank Vice President Vitor Constancio said the bank made its forward guidance on the existence of slack in the euro zone economy more precise at last week’s meeting, but this was not picked up by markets.

He also said the central bank still had policy options available, including lower interest rates or quantitative easing, if necessary.

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