LONDON, Sept 27 (Reuters) - Sterling dropped below $1.23 to a new two-week low and bond yields fell after a senior policymaker at the Bank of England said “prolonged high Brexit uncertainty” could warrant looser monetary policy if global growth stayed disappointing.
The pound weakened 0.3% to $1.2285 on Friday as his comments raised expectations that the next move from the central bank could be a rate cut. The pound also weakened 0.3% versus the euro to 88.83 pence.
British government bond yields dropped close to 5 basis points across the board following the news, with two-year yields sinking to 0.382%, their lowest since Sept. 9, while 10-year yields fell to their lowest since Sept. 4 at 0.472%.
A weaker pound lifted the export-focused benchmark stock index with the main equity index climbing 0.9% to its highest level since Aug. 2 (Reporting by the London Markets Team; Writing by Saikat Chatterjee; Editing by Karin Strohecker)