* Pound gains back towards $1.42 versus dollar
* Analysts say a lot of positive Brexit news priced in
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
LONDON, March 28 (Reuters) - The pound fell on Wednesday after the dollar rebounded and a survey showed British retail sales falling for the first time in five months in March.
Sterling had risen earlier in the day against the dollar and euro on a report that Britain will propose a new solution for the Irish border dispute holding up Brexit talks.
But disappointing UK retail sales, according to a survey by the Confederation of British Industry, and a broad rally in the dollar appeared to sap some of the recent optimism about the British currency.
"It's a dollar move. The dollar is up across the board. Looking at the (retail) numbers... the cold weather kept people at home. I'm guessing it could bounce back in April," said CMC Markets' chief analyst Michael Hewson.
The British currency fell 0.5 percent to $1.4095, down more than a cent from the day's highs of $1.42.
Against the euro the pound traded flat at 87.555 pence per euro.
End-of-quarter flows by global asset and fund managers rebalancing their portfolios can distort markets, analysts said, cautioning that investors should not read too much into moves in the final days of March.
The pound suffered its worst daily loss in three weeks versus the dollar on Tuesday after expectations of selling pressure from a large corporate healthcare deal prompted investors to take profits.
The British currency rallied last week after Britain secured a Brexit transition deal with the European Union and the BoE confirmed its hawkish tilt.
Britain and the EU agreed a Brexit transition deal last week that will buy both sides 21 more months to decide on their future arrangements after the UK leaves the trading bloc, but what to do about the Irish border remains unresolved.
Irish officials have been told to expect new proposals imminently from Britain on how it plans to avoid a post-Brexit hard border, The Times newspaper reported on Wednesday, citing unidentified sources.
Both Britain and the European Union say they do not want to go back to border checks between the Republic of Ireland and Northern Ireland.
More broadly, volatile equity markets in recent weeks could be bad news for the pound after its recent rally.
"The sell-off we're seeing in global equity markets poses some risks for the pound since the UK's credit account deficit makes it more sensitive to less favorable external conditions," said MUFG currency strategist Lee Hardman.
But Hardman said volatility in FX markets remained subdued and was not matching the turbulence seen in global equity markets. (Reporting by Tom Finn Editing by Alexandra Hudson)