Investing.com - The pound fell against the dollar and the euro on Tuesday after dovish remarks from Bank of England Governor Mark Carney tempered expectations for a U.K. rate hike this year.
GBP/USD touched session lows of 1.6974 and was last down 0.21% to 1.6993. The pair was trading at around 1.7022 before the speech.
Cable was likely to find support at 1.6940 and resistance at 1.7030, the session high.
The drop in the pound came after BoE Governor Mark Carney said that wage growth has been lower than expected, which could indicate there is more slack in the U.K. labor market than the bank previously thought.
He balanced this by saying that the economic recovery has more momentum than the bank would have expected.
In testimony to parliament’s Treasury committee, Carney said the exact timing of rate rises would be driven by data and reiterated that when rate hikes did come they would be limited and gradual.
Official data this month showed that the U.K. unemployment rate fell to a more than five year low of 6.6% in the three months to April. However, wage growth slowed in the same period, falling to an average of 0.9% from 1.3% during the previous three months.
Market watchers had brought forward expectations for a U.K. rate hike to the fourth quarter of this year from the early part of 2015 after Carney said on June 12 that interest rates could rise sooner than investors expect.
Sterling was also weaker against the euro, with EUR/GBP advancing 0.32% to 0.8015, up from 0.7984 ahead of Carney’s remarks.
The shared currency shrugged off data showing that German business confidence deteriorated this month, amid concerns about the impact of crises in Iraq and Ukraine.
The German Ifo business climate index fell to a six-month low of 109.7 this month from 110.4 in May and compared to estimates of 110.3.