June 15, 2018 / 8:52 AM / 4 months ago

Sterling hovers nears seven-month lows after dollar surges

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

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

LONDON, June 15 (Reuters) - The pound steadied Friday above its lowest level since November, after strong U.S. retail sales and a more hawkish Federal Reserve earlier this week boosted the dollar and underlined policy divergence between the countries.

Against the euro, the pound fell back after a rally on Thursday when the European Central said it would keep interest rates unchanged through the summer of 2019, sending the euro hurtling lower.

With most major economic data releases in June already published, Friday’s trading session was quiet. Focus turned to the Bank of England’s meeting next week and Prime Minister Theresa May’s ongoing efforts to convince her colleagues of her plans for Brexit.

May saw off a parliamentary rebellion this week over parliament’s role in the Brexit process and ensured her government’s all-important EU withdrawal bill passed .

But her Conservative Party remains divided over how much of a say parliament should have on the final terms of a deal with the EU. That deal, which Britain and the EU need to agree before Britain’s exit in March, will define their future relationship.

“Our base case for Brexit remains a ‘decent Brexit’ where the UK leaves the single market and most likely also the customs union but strikes a free-trade deal agreement ... We expect a lot of noise ahead of the important EU summits later in June and in October,” Danske Bank said in a note.

The pound traded flat at $1.3263, not far from the seven-month lows of $1.3205 it reached late last month.

Against the euro, sterling dropped 0.2 percent to 87.41 pence but remained above the 88-pence range it had traded at before the euro’s selloff on Thursday.

Markets expect the BoE to keep rates on hold next week, but will be looking for any signs that the central bank is more comfortable with how the economy is performing after a difficult first quarter.

UK retail sales this week assuaged concerns about a slowdown in the second quarter, although weaker-than-expected wage growth and industrial production numbers indicated the economy remains fragile.

“The domestic leg is struggling due to a combination of weak real wage growth limiting the scope for private consumption growth and Brexit uncertainties weighing on business investments,” Danske Bank said. (Reporting by Tommy Wilkes, editing by Larry King)

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