A woman passes by an outdoor advert with an image of the British pound bank note.

London - The pound weakened from a two-year high against the dollar as Bank of England policy maker Martin Weale said there has been a “sharp and unexpected” decline in inflation since the summer.

Sterling dropped to a three-week low versus the euro as Weale said at the National Institute of Economic and Social Research in London that easing price pressures meant it was now less likely for the central bank’s policy of forward guidance to be voided.

UK government bonds were little changed.

The pound declined 0.4 percent to $1.6381 at 1:22 p.m. London time after rising to $1.6466 yesterday, the highest since August 2011.

Sterling fell 0.4 percent to 84.03 pence per euro after depreciating to 84.12 pence, the weakest since November 20.

The pound has risen against all except one of its 16 major counterparts in the past three months on speculation economic growth will spur officials to increase interest rates sooner than they plan.

The benchmark 10-year gilt yield was at 2.87 percent.

The price of the 2.25 percent bond due September 2023 was 94.76. - Bloomberg News