March 20, 2018 / 9:11 AM / in 7 months

Sterling builds on gains ahead of inflation data

* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

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

LONDON, March 20 (Reuters) - The British pound rose on Tuesday ahead of consumer inflation data, with traders buying sterling a day after agreement for a Brexit transition deal sent the currency sharply higher.

Against the dollar, sterling consolidated above $1.40 and traded up 0.2 percent at $1.4054.

Versus the euro, sterling gained 0.2 percent to 87.778 pence per euro.

A Reuters poll of analysts expects year-on-year consumer price inflation for February to drop to 2.8 percent from 3 percent the previous month. The data is due at 0930 GMT.

Sterling rallied on Monday to a session high of $1.4088 after the European Union and Britain agreed on a 21-month transition period following Britain’s departure from the bloc next year.

The deal, keenly awaited by sterling traders, clears the path for the two sides to negotiate what their future trading relationship will look like.

The consumer inflation data comes ahead of employment and wage growth numbers due on Wednesday and a Bank of England rate decision on Thursday.

The central bank is expected to keep rates on hold but signal a May rate hike as it tries to bring inflation down to target.

“The Bank of England forecasts 2.9 percent (consumer inflation for February) so could on the margin be a disappointment for policy makers and the first for quite some time,” said analysts at Nomura. (Reporting by Tommy Wilkes Editing by Peter Graff)

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