The pound was knocked off course by the news that the number of unemployed people in the UK rose during the three months to January.

This morning the euro was at 1.4460 to the pound, while the dollar was at 1.7458.

Figures released by the Office for National Statistics (ONS) indicated that those officially classed as unemployed increased by 37,000 on the previous quarter.

With unemployment running at a rate of five per cent over the quarter, the rise in claimants has concerned some analysts.

Expectations were growing in some quarters that momentum could now be behind a rate cut later in the year. 

CIBC World Markets Audrey Childe-Freeman told Reuters that there were signs in the latest data that it was "far from an all clear for UK economy".

"It's only a matter of time before the rate cut debate resurfaces in the market," the European economist said.

Meanwhile, employment minister Margaret Hodge insisted that there was no cause for panic, pointing to what she said were encouraging underlying figures.

"The fundamentals remain strong. Employment is up on the year, vacancies up again this quarter and redundancies at historically low levels," Ms Hodge said.