The pound struck a new 26-year high against the dollar this morning as the markets positioned themselves for the expected Bank of England rate hike on Thursday. Ongoing concerns about the US housing market continue to weigh on the US currency, raising the prospect that the US Federal Reserve will not be changing its interest rates soon, thereby giving other currencies like the pound a yield attraction. "The pound is being buoyed by general belief that the Bank of England will lift interest rates by a further 25 basis points to 5.75 pct on Thursday, while it is also considered very possible that rates will reach 6.00 pct by the end of the year," said Howard Archer, analyst at Global Insight. "Meanwhile, the dollar has softened against a number of currencies amid expectations that the interest rate differential will become less supportive over the coming months as the Fed remains on the sidelines for some considerable time to come," he added. This combination has pushed the pound up to 2.0195 usd, breaking the 26-year high of 2.0174 usd recorded yesterday, while the euro is currently trading above 1.36 usd, very close to the lifetime high of 1.3683 that it achieved in late April. "The euro is benefiting from a generally weaker dollar, which continues to suffer from ongoing subprime mortgage woes," said Mitul Kotecha, head of global foreign exchange research at Calyon.