Forex - GBP/USD gives up gains after Carney comments

The pound erased gains against the dollar on Tuesday after Bank of England Governor Mark Carney said the 7% unemployment target is a threshold and not a trigger for rising interest rates.

GBP/USD dipped 0.01% to 1.6154 during European afternoon trade, down from session highs of 1.6194.

Cable was likely to find support at 1.6100 and resistance at 1.6239, Monday’s high.

Carney welcomed the fall in the U.K. unemployment rate to 7.6% in the third quarter, but reiterated that the bank’s 7% target for unemployment was a threshold at which the bank would consider raising interest rates.

"The exact timing of when that 7% threshold will be achieved is subject to uncertainty. We do our best to give our estimates of that uncertainty... One month's unemployment figures does not have a material change on those likelihoods," he said.

The comments came during testimony on the BoE’s quarterly inflation report before parliament’s Treasury committee.

Carney defended the bank’s forward guidance on rates, saying it gives market participants a view of the conditions that the bank needs to see before considering rate hikes.

On the economy, Carney said that "all the elements" were in place for a pick-up in activity.

Sterling was lower against the euro, with EUR/GBP rising 0.19% to 0.8382.

The euro shrugged off dovish remarks by European Central Bank board member Benoit Coeure, who said Tuesday that negative deposit rates are still a possibility.

Investors were turning their attention to preliminary euro zone inflation data, due out on Friday, amid expectations that the annual rate of inflation would rise to 0.8% in November, from October’s four year low of 0.7%.

The slowdown in euro zone inflation last month prompted the ECB to cut interest rates to a record low 0.25% at its November meeting.