LONDON: Sterling recovered from a three-week low against the euro in volatile trading on Tuesday after Bank of England Governor Mark Carney played down data showing UK inflation fell to a 12-year low in November.
Reflecting a slide in global oil prices, the consumer price index rose by an annual 1.0 percent in November, compared with 1.3 percent in October, the Office for National Statistics said.
The euro initially rose to 80.075, its strongest since November 20 against the pound, as investors bet the data would take yet more pressure off the Bank of England to raise interest rates any time soon. Against the dollar, sterling hit a day's low of $1.5610.
But the pound recovered after Carney said that falling oil prices were "unambiguously net positive" for the UK economy and that the inflation data left the bank's policy stance unchanged.
Sterling was last trading at $1.5713, up 0.5 percent on the day. Against the euro, it was 0.2 percent down at 79.43 pence. .
"There's some relief that the Bank of England is willing to look through downside surprises on inflation," said Daragh Maher, a currency strategist at HSBC.
"That gives you your near-term reaction but the reality is that the Bank of England is still fighting inflation expectations that are lower than was previously envisaged."
Until the summer, investors were betting that the Bank or England would be the first major central bank to raise rates from their historic near-zero levels, driving sterling to a six-year high against the dollar at almost $1.72 in July.
But after an uncomfortably close referendum on Scottish independence, as well as a run of softer data, the pound has since fallen almost 10 percent as rate hike expectations have been pushed back to the end of 2015 or early 2016.
"Today's data release further underlines the case for leaving interest rates on hold," said Ben Brettell, senior economist at Hargreaves Lansdown.
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