Sterling plunges more than 1% against the dollar, euro after Bank of England governor's comments on rates

LONDON — The British pound tumbled more than 1% against the U.S. dollar and euro on Thursday after Bank of England Governor Andrew Bailey suggested more positive inflation data could lead the central bank toward a more aggressive approach to interest rate cuts.

Sterling was down 1.16% to $1.3113 at 4:45 p.m. in London, slightly paring losses of more than 1.3% but still hovering near its lowest intraday level since Sept. 12. The drop put sterling on course for its steepest daily decline against the greenback for more than 20 months, according to a CNBC calculation of LSEG data.

Bailey told the Guardian newspaper in an interview published on Thursday that the BOE could become "a bit more activist" in its approach to rate cuts if inflation developments continued to be good.

He also said he was encouraged that cost of living pressures had not been as persistent as previously thought, according to the Guardian.

The pound was buoyed following the BOE's monetary policy meeting on Sept. 19, as British policymakers struck a more hawkish tone than those at the U.S. Federal Reserve and European Central Bank. It also found support over the summer from the decisive victory of the Labour party in the early July general election, with investors eyeing a period of political stability and the potential for pro-business reforms.

The upcoming budget, due to be announced at the end of October, had already caused some to question whether optimism around U.K. assets can hold, with political leaders repeatedly suggesting that tax hikes and public spending discipline will be required to meet a budget shortfall.

The pound meanwhile dropped 1.1%. against the euro Thursday, trading at its lowest level since Sept. 20. The drop put sterling on course for