The pound today ended its seven-day slump against the euro and rose for a second day against the US dollar as traders bet the embattled currency may have been oversold.

Sterling was up 0.77 cents against the European single currency to €1.0687, making the euro worth 93.56p. It was also up 2.24 cents against the greenback to $1.4161 having fallen as low as $1.35 on Friday — its weakest since September 1985.

The rally followed assurances yesterday from Barclays that it did not need a Government bailout which would have put the UK's fragile finances under ever greater strain. Barclays shares jumped 73% yesterday and were up another 12% or 10.3p to 99p today.

“The fact that sterling is benefiting from the banking news suggests that it may not be the lost cause that many seem to assume it is right now,” said Steve Barrow, head of G10 currency research at Standard Bank.

However, other analysts said that despite sterling's gains, its broad downward trend would continue due to weakness in the UK economy.

Last week figures showed the economy shrank 1.5% in the fourth quarter, the worst since 1980, while legendary American investor Jim Rogers advised people to “sell any sterling you might have” as the UK is “finished”.