Sterling jumped by over a cent against the dollar after the Bank of England warned interest rates were likely to rise for the first time in more than a decade in the "coming months".
Sterling initially dipped on the decision, as markets reacted to the fact that only two Bank of England policymakers had voted for an immediate rate hike.
There had been talk before the decision that another rate-setter could shift to that more hawkish camp.
But sterling reversed course to turn higher on the day as investors digested the bank's statement.
Sterling up as Bank of England says rates likely to rise in 'coming months' pic.twitter.com/ZED6hqyscI— RTÉ Business (@RTEbusiness) September 14, 2017
Policymakers said a rate rise was likely to be needed in the coming months if the economy keeps growing and inflationary pressures continue to build, saying their tolerance for above-target inflation was lessening.
All of them thought rates could rise faster than financial markets expect.
After dipping to $1.3148 initially, sterling jumped to the day's high of $1.339, up over a cent from where it had been trading before the release of the policy decision and leaving it up 1.4% on the day.
Against the euro, the pound gained 1.3% on the day to hit 88.7 pence - its strongest since July 20.