The pound advanced against its major counterparts in the European session on Tuesday, as risk sentiment improved amid strong earnings reports and ahead of central bank meetings, which are expected to continue on their rate hike cycles amid inflationary pressures.

The Federal Reserve begins its two-day meeting later today and is expected to deliver a 50 basis point interest rate hike on Wednesday.

The Fed is expected to begin reducing its balance sheet that has swollen to nearly $9 trillion.

The Bank of England will announce its interest rate decision on Thursday, with investors expecting an another 25 basis point hike to combat inflation.

The BoE has raised interest rates at three consecutive meetings and a fourth increase would take rate to 1 percent, a level not seen since early 2009.

The pound edged up to 1.2555 against the greenback and 0.8372 against the euro, following its prior lows of 1.2480 and 0.8413, respectively. The currency may possibly challenge resistance around 1.29 against the greenback and 0.82 against the euro.

Reversing from an early low of 163.42 against the yen, the pound rose to 163.42. The pound is seen locating resistance near the 165.00 level.

The pound touched an 8-day high of 1.2279 against the franc, up from a 4-day low of 1.2191 seen at 5:30 pm ET. If the currency rises further, 1.25 is likely seen as its next resistance level.

Looking ahead, U.S. factory orders for March will be released in the New York session.

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