LONDON: The pound fell versus the dollar on Tuesday after traders saw as dovish comments from incoming Bank of England rate-setter John Haskel about the uncertainty of the impact of Brexit on the economy.
Sterling fell as much as half a percent as Haskel, whose views on monetary policy are relatively unknown and who replaces a policymaker who has called for higher interest rates, spoke to the British parliament's Treasury Select Committee.
"For me, the 'depending on Brexit negotiations there may be at least a temporary lull in the economy,' speaks volumes," said Neil Jones, head of FX hedge fund sales at Mizuho, referring to Haskel's comments.
Jones said the comments suggested Haskel was more likely to vote for an interest rate hold than a hike, potentially shifting the BoE voting pattern back in favour of the doves.
Sterling had enjoyed a bounce off 7-month lows last week after a Bank of England meeting last week raised expectations of a rate hike in the coming months. But the rally has proved short-lived.
The pound fell half a percent to $1.3208, still above its 7-month lows of $1.3102 plumbed last week.
Sterling also gave up its gains versus the euro to 88.120 pence per euro as Haskel spoke.
The British currency had already been under pressure on Tuesday as concerns about a growing trade conflict between the United States and other major economies limited investor appetite for risk.
Sterling traders were also refraining from taking out big positions before a European Union leaders' summit later this week.
An EU leaders summit this week means the focus for much of the trading sessions will be on Britain's efforts to agree a deal with the European Union on the shape of their trading relationship after their divorce.
"If the spreading weakness of global equity markets reflects a dawning realisation that the economic cost of a trade dispute is significant, then it should be no surprise that concern is growing about the impact of leaving the single market," said Kit Juckes, a currencies strategist at Societe Generale.
Juckes said he found it difficult to be cheerful about the outlook for the pound. Rate differentials between Britain and the United States suggested a lower pound and the currency has also failed to capitalise on euro weakness caused by a more dovish European Central Bank.