Pound surges to a two-and-a-half year high against dollar

The pound rose above $1.60 for the first time in two and a half years yesterday, boosted by the continuing strength of the euro against the dollar as concerns grow about the likelihood of a US attack on Iraq.

Sterling's bright performance, up 0.25 of a cent on the day, overshadowed largely expected UK unemployment and average earnings figures for November, and uneventful minutes of this month's meeting of the Bank of England's Monetary Policy Committee.

The number of jobseekers claiming unemployment benefit has dipped to a 27-year low while the level of people in work has soared to a record, according to the Office for National Statistics. Claimant numbers fell by 6,200 last month to 934,200, the lowest since 1975, giving a jobless rate of 3.1 per cent.

The number of people in work increased by 105,000 between August and October to 27.76 million, the best figure since records began in 1984.

Nick Brown, the Minister for Work, said the figures showed the UK continued to enjoy economic stability, rising employment and more people moving from welfare to work.

He said: "This is a very good performance in the face of increased global economic uncertainty. Vacancies are high and our active labour market policies are ensuring that people take up these opportunities and move into work."

But the shadow Work and Pensions Secretary, Tim Yeo, retorted: "For the first time since Labour came to power, the consequences of recent changes in the balance between employers and union leaders are being felt. Forcing statutory recognition of trade unions, weakening employer rights to dismiss strikers at the start of a strike ... a new mood of militancy now threatens our previously good strike record."

The general secretary of the Trades Union Congress, John Monks, said: "While today's labour market figures show a welcome increase in overall employment, the latest annual data show manufacturing shedding about 170,000 jobs. With signs that wage inflation is weakening further ... there is still room for the Bank of England to cut rates to give the economy a new year boost."

But there was little hint of that in the latest minutes of the MPC. For the second month running the Committee voted 7 to 2 not to change interest rates. The same two members – Christopher Allsopp and Stephen Nickell – were in the minority, voting for a quarter point cut.