The pound celebrated a five month high against European currency this morning, having remained buoyant after events yesterday as traders awaited the release of BoE minutes this morning. The dollar also strengthened against the euro whilst its Canadian counterpart lowered its growth outlook.

Pound Sterling – UK Markets

Sterling hit a five month high against a weaker euro on Wednesday following speculation that the central bank's quantitative easing would pause next month. These expectations were fuelled by a rise in consumer inflation yesterday, although BoE Governor Mervyn King played down the UK inflation spike in his first major speech of the year. The pound sat at 1.148 against the euro at 0941 GMT but fell off it’s six-week high reached yesterday against the dollar as the US currency gained broadly to keep the pair trading around 1.627 at time of writing.

US Dollar – US Markets

The dollar has strengthened on optimism that the US climb towards recovery will outpace that of other nations, increasing demand for dollar denominated assets and the outlook for Europe's economy discouraged demand for risk. The greenback received a boost after Treasury data showed net capital inflows to US assets rebounded in November. At 0857 GMT, US currency traded at 0.612 against the pound and 0.703 versus the euro.

Euro – European Markets

The euro declined to its weakest level in four months against the dollar today due to concerns about a decline in German investor sentiment and Greece's public finances. Trading below USD1.43 earlier this morning, its lowest level since December 23rd, the euro then traded around the 1.42 mark at 0848 GMT. The single currency also stooped to its lowest level in 5 months against the pound after Kraft Foods agreed to buy British chocolate-maker Cadbury Plc, increasing demand for sterling. EUR/GBP traded at 0.870 at 0850 GMT and investors have been selling the currency on concern that Greece will struggle to contain its budget deficit.

Other Currencies – Highlights

The Yen gained against the US dollar, hitting a 4-week high after Japan Airlines filed for bankruptcy protection, owing more than USD25 billion. The Canadian dollar was down against the greenback at 1.0348 (0945 GMT) after the Bank of Canada held rates steady and slightly lowered its growth outlook, saying a strong currency remains a risk to recovery.