Sterling climbed nearly one percent on the dollar on Monday and gained on the euro after weekend comments from a Bank of England policymaker emboldened investors betting on higher British interest rates.
An upbeat manufacturing survey also reinforced expectations the Bank of England's Monetary Policy Committee could raise interest rates from 4.0 percent when it meets next week.
In a newspaper interview at the weekend, BOE Monetary Policy Committee Paul Tucker said interest rates may need to rise and low inflation would not prevent that.
The pound had dropped to a four-month low on the dollar last week after subdued inflation data and minutes from the MPC's April meeting showed only one of the nine members voted to raise rates, a more one-sided outcome than the market had expected.
By 1430 GMT sterling was off the day's high of $1.7887 and was standing 0.7 percent up from late New York levels on Friday at $1.7853.
Against the euro it was around half a percent firmer on the day at 66.47 pence per euro.
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