Sterling rose to one-month highs versus the dollar and euro on Tuesday, as hopes lockdowns may be slowing the spread of the coronavirus pandemic strengthened currencies seen as riskier bets.
The pound has benefited from improved risk sentiment this month as some economies consider reopening and their coronavirus cases slow, even as experts warn Britain may be on course to become the worst-affected country in Europe.
Sterling had slumped to levels not seen since 1985 versus the dollar in March, but it has since rebounded along with other currencies that sold off, such as the Australian and New Zealand dollars.
The pound reached $1.2575 in early trading, its highest since March 10. It gained to a one-month high of 87 pence per euro.
The euro had been hurt by indecision among euro zone governments on an emergency economic package, although a compromise deal was struck on Friday worth half a trillion euros.
"We're still in this reversal mode where currencies hit hard last month are rebounding," said Lee Hardman, currency analyst at MUFG.
"The pound was one of the worst performing currencies last month. Britain has a large current account deficit and is seen as vulnerable in crisis conditions – it also performed badly in the financial crisis.
"But we are now moving away from a period of tension and stress in markets, allowing currencies like the pound to gradually recover." (Reuters)