February 24, 2017 / 9:45 AM / 6 months ago

Sterling on course for strongest week in a month

* Graphic: Sterling and gilt yields bit.ly/2dgAXn1

* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv

By Ritvik Carvalho

LONDON, Feb 24 (Reuters) - Sterling slipped from a 2-week high to the dollar on Friday but was still on track for its strongest week since January as concerns about politics in the United States and Europe took investors' focus off immediate Brexit worries.

Besides the Brexit bill making its way through Britain's upper house of parliament, a week largely lacking in major domestic political developments and new economic numbers has given the pound some respite.

A number of major banks have predicted another round of selling of sterling if talks on leaving the European Union get going next month, as planned by the government .

But a number of technical analysts have said this week that chart readings suggest even odds of a break up or down.

"Sterling may well continue to recover in coming weeks as long as market players focus elsewhere," said Richard Falkenhall, a strategist with Swedish bank SEB.

"While we see good reasons to maintain a negative view on sterling over the medium term, the political uncertainty created by upcoming elections in several euro zone countries this year and the political situation in the US currently seem to overshadow the troubles we believe will be facing the UK economy going forward."

The pound inched down 0.2 percent against the dollar at $1.2530 by 0906 GMT, having touched a 15-day high of $1.2570 in early trade in London. It was down a quarter of a percent at 84.37 pence per euro.

That put sterling up just over 1 percent for the week against the dollar, the euro and the basket of currencies that measures its broader strength.

The week was not entirely devoid of Brexit developments.

On Thursday, sources close to the Scottish government said the devolved administration in Edinburgh was increasingly confident it could win a new independence referendum and that it is considering calling one next year.

British Prime Minister Theresa May's Conservatives secured a landmark victory in a parliamentary by-election on Friday, boosting her hand ahead of the upcoming negotiations as her rivals suffered damaging poll setbacks.

"After two post-referendum legs of independent weakness, GBP has become little more than a range trade for the last three months or more, caught between increasingly independent moves in USD and EUR," said RBC Capital Markets global head of FX strategy Adam Cole in a report, adding that the outlook for sterling would be lower than RBC's $1.15 target.

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