LONDON- The pound was little changed against the dollar and euro on Wednesday, having erased its recent gains against the dollar as risk appetite soured somewhat and dollar strength returned.

Global market sentiment turned more cautious, with the safe-haven dollar spiking after Bloomberg News reported the United States was considering tariffs on $3.1 billion of exports from Britain, France, Spain and Germany. 

Fears of a second wave of COVID-19 infections also contributed to a reversal of recent optimism. 

"There's been a little bit of 'risk-off' – we can see that in the stock markets this morning and I think we can see that in the news about the second wave in the U.S. and other countries," said Jane Foley, senior FX strategist at Rabobank.

British Prime Minister Boris Johnson unveiled on Tuesday a significant easing of the coronavirus lockdown in England. 

But top medics signed an open letter on Wednesday in the well-regarded British Medical Journal warning politicians about the risk of a second wave.

Against the dollar, the pound fell overnight then rose in the morning. At 1050 GMT it was at $1.2522, flat on the day.

Euro-sterling edged down from the three-month highs hit on Tuesday after positive European economic data. At 90.19 pence per euro, the pound was up around 0.1%.

Four years after Britain voted to leave the European Union, the pound is still well below its pre-referendum levels and there has been little progress in agreeing the country's future trading relationship with the bloc.

Britain and the EU are set to miss their agreed end-of-June deadline for assessing whether the United Kingdom's financial services regulation is deemed "equivalent" to regulatory standards in the EU. 

This leaves just six months before a potentially messy UK exit, financial industry and EU officials say.

Foley said that, if a deal was reached, it would make sterling rally. But in the absence of such news, she expects euro-sterling to edge higher towards 91 over the summer.

Analysts at Bank of America wrote in note to clients that the pound should be considered more like an emerging market currency than a core G10 currency.

"In our view, Brexit is likely to permanently alter the way in which investors view the pound," they wrote.

"We believe GBP is in the process of evolving into a currency that resembles the underlying reality of the British economy: small and shrinking with a growing dual deficit problem similar to more liquid EM currencies," they added.

(Reporting by Elizabeth Howcroft; Editing by Emelia Sithole-Matarise and Alex Richardson) ((Elizabeth.Howcroft@thomsonreuters.com; +44 02075427104;))