The euro hit a five-month low against the pound this morning, due to concerns over the fiscal health of Greece and other Euro-Zone countries. Sterling was supported by positive comments from a UK policymaker whilst the dollar made gains on expectations of a rise in interest rates.

Pound Sterling – UK Markets

Bank of England policy board member Andrew Sentance gave sterling some firm support yesterday when he said that it may be difficult to keep inflation on target if import and services prices keep rising. The focus on inflation strengthened the view that the Bank of England will next week opt to pause asset purchasing under its quantitative easing programme. Sterling was also buoyed against an underperforming euro, which remained under pressure due to concerns over the fiscal health of Greece and, increasingly, Portugal. This morning at 0915 GMT sterling traded against a weakened euro at 1.156 and pushed against the dollar at 1.620.

US Dollar – US Markets

Following signals from the US Federal Reserve that American interest rates may be raised sooner then expected, the dollar received a considerable boost in trading last night and early this morning. The dollar reacted by shooting up to a near 6-month high against the euro yesterday after trading as low as 1.3994 early that day. At 0920 GMT, the greenback sat around 1.4015 and traders can expect it to make further gains today providing news comes in as predicted: Analysts are generally optimistic, with unemployment forecasted to drop and the Core Durable Goods Orders expected to be positive.

Euro – European Markets

Earlier, the euro fell as low as 86.28 pence which is it’s weakest since late August. At 0903 GMT it traded at 0.865 against the pound and 1.401 versus the dollar. The euro fell below the psychologically significant 1.4000 mark against the dollar yesterday, which was largely due to the belief that US interest rates may be increased in the near future. Traders may want to keep an ear out for any news regarding Portugal's handling of their debt as experts are saying that their current budget will not do enough to cut their deficit to a responsible level. If this is the case, there may be darker days ahead for the euro.

Other Currencies – Highlights

The Yen weakened against the New Zealand and Australian dollars as well as US currency to trade at NZD64.00, AUD81.35, and USD90.269 at 0932 GMT. Investors are continuing to flock to the greenback and away from the yen as a change in American interest rates seems probable. The yen also fell against the euro, with the pair shooting up to levels around 126.51 at the time of writing.