The dollar gained against the pound and euro in Monday foreign exchange trading following a report showing that the economy service sector grew during January.

The dollar traded at $1.9596 on the pound from $1.9673 on Friday and at $1.2927 on the euro, from $1.2967 on Friday. It slipped to ¥120.35 however, from ¥121.07 previously.

The trading followed a better-than-expected Institute for Supply Management report which showed that service sector business rose from 56.7 points to 59.0 in January.

Expectations had been no higher than 57. The industries covered by the report account for about 80 per cent of total US activity and are expected to drive growth in 2007.

Both the Bank of England and the European Central Bank will meet to set interest rates later this week, with most analysts expecting rates to remain unchanged.