Sterling briefly pushed above the $1.40 mark today, extending a rally in which growing optimism about the UK economy and protracted dollar weakness have offset worries about Brexit's terms.
Many investors are also betting that Britain can secure a favourable deal with Brussels to leave the EU, helping to push back a hurdle that has kept in check sterling's recovery.
Since the last week of December, traders have powered a 3.5% rally in the pound to its highest level since June 2016, when Britain voted to leave the EU.
Sterling rose above the $1.40 level in early trade today to a post-Brexit high of $1.4005.
On a year-to-date basis, it is the best performing major currency, beating even the euro which is up more than 2% in that period thanks to a rapidly improving economy.
In later trade this afternoon, sterling was trading at $1.3949 against the dollar. Against the euro, it was broadly flat at 87.77 pence.
Data last week showed that speculators increased their bets that sterling will rise to the highest level in over three years, on the view that Brexit talks had so far gone relatively well and that the UK economy was ticking along better than many had expected.
Currency traders believe the mood in London and Brussels suggests both sides are more amenable to hammering out a transition agreement between Britain and the trading bloc, and then an eventual deal for the terms of departure.
With the chance of a "hard" Brexit reduced, the pound has re-anchored itself to UK economic performance and to monetary policy outlook.
Some traders reckon the Bank of England could tighten faster than expected given stubborn inflationary pressures.
Market expectations are for one more rate hike from the central bank in the latter half of 2018.