LONDON, June 21 (Reuters) - Sterling dipped below $1.26 for the first time in more than two months on Wednesday, deepening this week's losses on signs that Prime Minister Theresa May is still struggling to find the support she needs for her government in parliament.
Hit by a retreat in the chances of a rise in interest rates after comments by Bank of England Governor Mark Carney on Tuesday, the pound fell another 0.2 percent in early London trade, to $1.2592.
It also weakened 0.3 percent to 88.40 pence per euro as officials said May would not seal a deal with Northern Irish Unionists (DUP) before the new parliament is launched by the Queen's Speech on Wednesday.
"Governor Carney's Mansion House speech killed any wind that was in sterling's sails yesterday," Societe Generale strategist Kit Juckes wrote in a morning note to clients.
"The Conservative Party's lack of progress in reaching a deal with the DUP won't help sterling either." (Reporting by Patrick Graham and Ritvik Carvalho, editing by Nigel Stephenson)