The pound briefly hit its highest level against the dollar for almost four years after markets were unnerved by a report that US President Donald Trump could bring forward the naming of the new head of the US central bank.
Sterling rose above $1.37, which is the strongest since October 2021.
The dollar weakened after the Wall Street Journal reported Trump had considered naming Jerome Powell's replacement as head of the Federal Reserve by September or October.
The US Fed is independent from the government and Mr Powell chairs a committee that decides on interest rates which have remained unchanged this year, prompting a series of angry outbursts from Trump.
On Wednesday, Trump called Mr Powell "terrible" and said he was looking at "three or four people" who could replace him. Mr Powell's term is due to end in May 2026.
