The pound extended its rally after credit ratings agency Standard & Poor's revised its outlook on the UK to "stable' from "negative". S&P also confirmed Britain's triple A credit rating.
Sterling jumped about 1% against the dollar and the euro to reach a session high of $1.5895, and 87.76p against the euro.
Gary Jenkins at Evolution Securities said: "S&P were the agency that assigned a negative outlook back in August of last year. The fact that they have now affirmed the AAA rating and revised the outlook to stable will be seen as vindication of the coalition governments fiscal policies and will not do the gilt market any harm."
The pound started rising after official figures showed this morning that Britain's economy grew by 0.8% in the third quarter, twice as fast as expected.
