Pound at four-month high

The pound has hit a four-month high against both the dollar and the euro as the currency reached 74.49p per euro and traded at $1.9450 today.

The shift comes after three days of consecutive losses against the dollar, aided by massive federal rate cuts.

Fears of a slowdown or recession in the US economy caused by the subprime mortgage meltdown have incited turmoil in global markets.

The concern was enough to cause the Federal Reserve to lower the federal funds rate by 1.25 per cent, the biggest in 25 years.

Meanwhile, the Congress has passed an economic stimulus bill to the tune of $152 billion (£78.26 billion) last night in Washington to aid the American economy.

Nonetheless, the pound has been able to make gains on the dollar yesterday after the UK made a rate cut of its own and new US service sector data renewed US recession worries.

Meanwhile, the euro has sagged in trading against the pound, breaking two days of gains after European Central Bank (ECB) president Jean-Claude Trichet expressed openness to lowering interest rates for the first time in five years.

“Uncertainty about the prospects for economic growth is unusually high,” said Mr Trichet, although he left the ECB’s benchmark interest rate unchanged at four per cent - a six-year high.

The euro trimmed down 2.1 per cent during the week, the most since June 2006. The dollar gained one per cent during the same period, while the pound has fallen 0.8 per cent.