The euro plummeted to a seven-month low against the dollar early on today, pressured by concerns about the fiscal health of Greece, Portugal and Spain ahead of a European Central Bank policy meeting. Meanwhile the pound held tight ahead of the BoE policy decision due later today.

Pound Sterling – UK Markets

Sterling was kept on hold this morning in anticipation of the BoE meeting in which the central bank is expected to pause its quantitative easing and keep interest rates at record lows. If we do see an end to Quantitative Easing then the reaction should be a positive boost for sterling and analysts believe this could lure the pound back toward the USD1.6000 mark. At 0949 GMT the pound hovered around USD1.5881 and anyone rooting for sterling must bear in mind that a lethargic economy coupled with a tighter fiscal policy will make a rise in interest rates unlikely until later in the year. Traders should also bear in mind that if the economy fails to maintain sufficient recovery during the next few months, then further QE measures may be necessary.

US Dollar – US Markets

The dollar rose to the strongest level against the euro since July in early trading today, as concerns about an uneven global recovery developed and deficit problems continued to fester the Euro-Zone. The US currency climbed against 15 of the 16 most-traded currencies, sending the Dollar Index up for a second day to a six-month high of 79.623. Markets will now look towards the January Non Farm Payroll Data, due Friday. The Labor Department is expected to show that the US economy added 20,000 jobs last month, which would be the biggest gain since 2007. Today, Unemployment Claims are due to be released at 1330 GMT and this data might prove quite volatile for the dollar, especially if the result contrasts with Friday's expectations.

Euro – European Markets

In early trading this morning, the euro fell 0.4% to USD1.3844, its weakest since early July 2009 according to analysts’ data. The euros demise follows speculation the European Central Bank will refrain from ending emergency measures at a meeting today as Greece fights to curb its budget deficit. At time of writing the euro sat at USD1.3849 and the outcome of today’s policy meeting will likely shift the single currency.

Other Currencies – Highlights

The Japanese Yen gained against thirteen of its major counterparts as reports in today's early trading showed Australian retail sales unexpectedly shrank and New Zealand's jobless rate rose. The Kiwi toppled against major counterparts following the release of the fourth quarter unemployment rate which showed unemployment in New Zealand increased sharply in the final quarter of 2009, touching its highest level in more than ten years.