The pound briefly nosed above $1.43 in early trading, a post-Brexit vote high, as the euro held a three-year high against the dollar ahead of the European Central Bank's (ECB) first meeting of 2018.
The pound rose as high as $1.4326 in morning trading, while the euro breezed to $1.2458, having risen to its highest since the end of 2014 yesterday.
The dollar was sent lower by comments from US treasury secretary Steve Mnuchin at Davos, who suggested that a weaker dollar is "good for us as it relates to trade and opportunities".
"[Mnuchin] also pointed out that that he isn't concerned by where it is in the short term and that in the longer term, its strength is a reflection of the strength of the US economy," said Kit Juckes, macro strategist at Societe Generale.
"In other words, he said very little really, but he said it under snow-plastered slopes and he was speaking to a market where dollar bulls have been under the cosh. A few more capitulated."
The euro was also strengthened on hopes the ECB will keep interest rates on hold when it meets today. Analysts suggested Mario Draghi, the bank's president, will attempt to weaken the euro after its winning streak against the dollar in recent weeks.
"It is likely [Draghi] will express concerns for the relatively low level of inflation, in a bid to talk down the value of the euro," said David Madden, market analyst at CMC Markets UK.
Read more: Eurozone economy booms to 12-year high in activity
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