Sterling recovered on Wednesday, as some traders bought back into a currency that had slipped to a two-week low the day before during a flight to financial safe havens after oil prices crashed.
The pound is still above its mid-March lows, but analysts said its correlation to equities and other riskier assets make it a risky bet itself. It was last up 0.3% against the dollar at $1.2336 and 0.6% versus the euro at 87.77 pence.
"I think it's more of a little bit of a relief rally," said Jeremy Stretch, head of G10 FX strategy at CIBS Capital Markets. A move higher in equity futures this morning was "also seen as a little bit of a catalyst for a small sterling bounce", he said.
Sterling continued to benefit from equity price gains. Britain's top equity index rose on Wednesday after positive corporate updates, which helped calm the mood after stocks sold off the day before as oil prices plunged.
On top of that, "we haven't seen the capitulation in consumer prices we might have feared," Stretch said.
The pound got some help on Wednesday from a report showing Britain's inflation rate dropped in March, as oil prices fell and the coronavirus crisis escalated, but was in line with expectations.
The pound had fallen the day before to $1.2248, a 13-day low. A month before that, it went to as low at $1.1413, its weakest in decades.
A British military plane carrying medical protective equipment from Turkey landed in Britain early on Wednesday.
The government has been criticised for not being well equipped to fight the novel coronavirus, advising medical staff to reuse personal protective equipment (PPE).
Comments by the top official at the foreign ministry, who said on Tuesday that Britain made a political decision not to participate in a European scheme to buy ventilators and other equipment, also caused controversy.
Asked about the comment, health minister Matt Hancock denied there had been a political decision.
The number of people who have died in hospitals in the United Kingdom after testing positive for the coronavirus has risen to 18,100, the health ministry said on Wednesday, an increase of 763 on the figures published 24 hours earlier.
"I think sterling will drift back lower as the data proves troublesome through the rest of the week, and also markets continue to focus on the return of politics and political risk into the UK," Stretch added.
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