The pound briefly hit its highest level against the dollar for almost four years after markets were unnerved by a report that US President Donald Trump could bring forward the naming of the new head of the US central bank.

The dollar eased to a fresh 3-1/2-year low on the euro on Thursday as concerns about the future independence of the U.S. Federal Reserve undermined faith in the soundness of the country's monetary policy.

A report that President Donald Trump may announce a replacement for Federal Reserve Chair Jerome Powell by September or October pushed down the US dollar as investors saw it as a sign that early rate cuts were becoming more likely.