Lewis told BBC Radio Cambridgeshire: "Psychologically it's massive because to be bottom at Christmas is an omen for a lot of teams.
"To be off the bottom is great and hopefully that will kick-start our season now."
Posh are now just four points adrift of safety but face promotion-chasing West Brom and Cardiff over the Christmas period.
Lewis said it was important they turned the Watford victory into the start of a winning run.
"The lads haven't been disheartened as we've been playing well, but the results weren't coming," he said.
"It's our first win under the new manager and a massive boost for the club."