Sterling rose to one-month highs versus the dollar and euro on Tuesday, as signs that lockdown measures may be slowing the spread of the novel coronavirus strengthened currencies seen as riskier bets.
The pound has benefited from improved risk sentiment this month as some countries consider reopening their economies, even as experts warn Britain may be on course to become the worst-affected country in Europe.
News over the weekend that Prime Minister Boris Johnson had left hospital and was recovering from COVID-19, the respiratory disease caused by the virus, has also helped support the pound.
Dire new economic forecasts on Tuesday from Britain's Office for Budget Responsibility and the International Monetary Fund for economies including the UK barely moved the pound, with analysts saying a deep recession is largely priced in.
Sterling had slumped to levels not seen since 1985 versus the dollar in March, but has since rebounded along with other currencies that had sold off, such as the Australian and New Zealand dollars. The pound topped $1.26 in afternoon trading, its highest since March 13.
It hit a one-month high of 86.84 pence per euro, before paring back gains to be broadly flat.
The single currency 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.
"The Covid plateau is taking shape across the globe and expectations for stability and a decline (in infections) are continuing to put a structural bid tone into asset markets," said Neil Jones at Mizhuo Bank.