LONDON- The pound inched higher against the U.S. dollar on Tuesday as investors turned their attention to Federal Reserve and European Central Bank meetings this week at which officials could provide further stimulus to their economies to fight the coronavirus.
Sterling has been closely correlated with riskier assets, such as stocks, and when investors' risk appetite increases, the pound tends to move up.
The pound was 0.6% higher at $1.2498 GBP=D3 , having risen earlier to a 1.5-week high of $1.2516.
British retailers suffered their biggest fall in sales since the 2008 financial crisis in the first half of April, the Confederation of British Industry said on Tuesday, checking the pound's rise against the common currency.
The British currency was flat versus the euro at 87.11 pence after rising to an eight-day high of 86.91 pence earlier.
The Bank of Japan said on Monday it was expanding its stimulus to help companies hit by the coronavirus crisis, pledging to buy an unlimited amount of bonds. Traders expect the Fed and the ECB to follow suit, on Wednesday and Thursday respectively.
"I would assume that the pound is tracking risk assets higher," said Stephen Gallo, European head of FX strategy at BMO Financial Group.
"On the whole this week, given all the central bank meetings that are coming, anyone who had risk-off trades on, they probably would be trimming some of that exposure. You don't fight the central banks," Gallo said.
A further 360 people have died from COVID-19 in British hospitals, data showed on Monday, bringing the total to 21,092. It was the lowest daily death toll for four weeks.
Officials, including Prime Minister Boris Johnson, warn against lifting lockdown measures too early.
Kit Juckes, macro strategist at Societe Generale, said "sterling's at best stuck in a tight range, at worst vulnerable to a fresh bout of nerves in due course."
(Reporting by Olga Cotaga; editing by Angus MacSwan and Barbara Lewis) ((olga.cotaga@tr.com))
