The pound was on a largely downhill trajectory in early trading, hitting lows of $1.4036 from Monday's post-Brexit referendum high of $1.4339.
Investors were down on the currency after Carney said in a BBC interview on Thursday that though interest rate hikes were "likely" over the next few years, economic data was causing the Bank to hesitate.
"The biggest set of economic decisions over the course of the next few years are going to be taken in the Brexit negotiations and whatever deal we end up with," he told the BBC.
"And then we will adjust to the impact of those decisions in order to keep the economy on a stable path."
This forced market observers into realising that a May rate hike was perhaps not the foregone conclusion they had expected.
Investors' bets on a hike shrank to around 40 per cent from 70 per cent earlier this week, according to Reuters estimates derived from the swap markets.
Sterling had already fallen by around 0.77 per cent against the dollar on Thursday evening.
Carney's comments struck a chord of alarm in currency markets, which had previously been banking on a rate rise.
The Bank of England's Monetary Policy Committee (MPC) is due to announce its decision on interest rates on 10 May, and at its last meeting in March had been sounding fairly bullish on the chances of a hike.
But Carney added: "Retail sales have been a bit softer – we are all aware of the squeeze that is going on in the high street. Well sit down calmly and look at it all in the round."
What the analysts said
"First was Tuesdays improving, but lower than forecast, wage growth numbers; next Wednesdays one-year low inflation reading; and then on Thursday, Marchs Beast from the East-blighted retail sales. The culmination of this unhappy hat-trick came as Mark Carney put the boot in on Thursday night," said Spreadex's Connor Campbell.
However, he noted that Carney's cautious tone was not bad news for everyone.
"Obviously the FTSE, which has seen its tempestuous relationship with the pound return this week, was pretty damn pleased at sterlings softening," Cambell added. "The UK index jumped around half a percent after the bell [on Thursday], sending it to a fresh 11-week peak of 7360."
LCG's research team said that the Bank of England governor's comments were designed to be grounding for some market watchers.
"Mark Carneys comments that there are other central bank meetings where a rise could take place was more than a gentle reminder, this was a stern warning that markets had not been considering the recent economic data carefully enough," said LCG's head of research Jasper Lawler.
"Markets have been running away with themselves whilst inflation is in actual fact moving back towards the Bank of Englands target rate of two per cent and Brexit uncertainties could also delay any hikes."