The pound began the week on a downbeat note, hitting a six-week low against the euro, before slowly recouping some of the losses as investors looked ahead to the upcoming Spring Budget later this week.

Having hit a seven-week low against the dollar on Friday (3 March), sterling plunged to €1.1532 in early trade, the lowest level against the euro in six weeks. However, by early afternoon, the UK currency had regained some ground was trading 0.11% higher at € 1.1589 but remained down 0.21% against the dollar, exchanging hands at $1.2274.

"Sterling may get a boost on Wednesday when Philip Hammond plunges billions of pounds into a Brexit impact fund in his first Spring Budget; for now, however, it remains in the doghouse," said Spreadex financial analyst Connor Campbell.

The dollar, meanwhile, recorded only marginal gains against most of its rivals, even though the markets are firmly convinced the US Federal Reserve will hike interest rates this month.

The possibility of a rate hike in March surged from 30% to 80% last week, on the back of comments from a number of Fed policymakers, including Fed Chairwoman Janet Yellen. With only 10 days left before the decision, only a disappointing jobs report this coming Friday could alter the Fed's stance.

"Wage growth has been disappointing analysts, coming in well below expectations for the past three month," said FXTM chief market strategist Hussein Sayed.

"However, if February figures buck this trend, not only this will strengthen the case for a March move, but even accelerates the expected pace of tightening policy, leading to a stronger dollar."

Broadly flat against its Australian and Canadian counterparts, the greenback was 0.22% lower against the yen, trading at ¥113.79, but gained 0.29% and 0.17% against the euro and the Swiss franc respectively, fetching €0.9442 and CHF1.0096.

Analysts at Fathom Consulting explained they now expected three 25 basis point increases in the Fed funds rate this year, compared to the previous forecast of two, and a total of four 25 basis point increases next year.

"Although the committee appears set to tighten sooner than we had previously imagined, one additional 25 basis point rate increase will not have a material impact on GDP growth or inflation," they said in a note.

"On this basis, we still anticipate further increases in the US dollar, US Treasury yields and US equities. It would take a shockingly weak payrolls figure this Friday – much lower than our forecast of 210,000 – for the Fed to hold fire next week."