The bank’s rate-setters could be “a bit more aggressive” on lowering borrowing costs if inflationary pressures continued to wane, Bailey told the Guardian newspaper. Sterling fell to $1.3121 from $1.3268, extending its decline from last week when the currency traded above $1.34.

Tight monetary policy coupled with a penny-pinching fiscal agenda usually results in currency appreciation, and sterling is surging on the prospect. But it's far from clear why the UK government or the Bank of England want a rising pound right now.

The Pound Sterling (GBP) gains further against its major peers on Tuesday. The British currency strengthens as investors expect that the Bank of England’s (BoE) policy-easing cycle would be shallower than other central banks from Group of Seven (G-7) nations.