* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
By Ritvik Carvalho
LONDON, June 23 (Reuters) - Sterling hit a 2-1/2 month high against the euro on Wednesday and gained for a third straight session against the dollar, continuing a recovery after it fell in the wake of last week's Federal Reserve meeting.
Recent movements in the pound have been dollar-driven, as investors price in earlier than expected asset purchase tapering from the Federal Reserve, after the U.S. central bank signalled last week higher rates in 2023.
By 0749 GMT, sterling was 0.3% higher at $1.3979. It was also up 0.3% against the euro at 85.35 pence, its highest level since April 6.
Investors were also keeping an eye on the release of UK flash purchasing managers indexes for June due at 0830 GMT to gauge business activity and planning.
"In the UK, the focus is on June PMIs," ING strategists said in a morning note. "We may see a slight increase in the services index again, though manufacturing PMIs may reverse lower modestly after their meaningful rise last month."
"GBP has recently started recovering some ground vs EUR but despite this, EUR/GBP still screens as modestly overvalued based on our short term financial fair value model."
Britain has delayed the final phase of its economy's reopening by a month to July 19. Prime Minister Boris Johnson has said the extra time would be used to speed up the country's vaccination programme.
Sterling has been among the top performing 'G10' currencies this year on bets that Britain's economy will reopen quicker than peers due to the country's COVID-19 vaccination programme. About 80% of Britain's adult population has received a first dose.
CFTC data shows speculators maintaining a net long position on the currency.
(Reporting by Ritvik Carvalho; Editing by Ana Nicolaci da Costa)