June 13, 2018 / 8:08 AM / 3 months ago

Sterling slips towards 1-week lows before inflation data

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

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

LONDON, June 13 (Reuters) - Sterling slipped on Wednesday, heading towards a one-week low as investors positioned for UK inflation data that might decide the case for a rate hike over the next few months.

The British currency was unable to hold on to overnight gains after Prime Minister Theresa May saw off a rebellion in parliament over amendments to a bill for the country’s exit from the European Union next year.

MUFG and other market analysts interpreted the outcome as a sign that political pressure will remain in place to soften the Brexit divorce, but the data and a U.S. Federal Reserve policy meeting kept investors on the sidelines.

“There is plenty of event risk out there today with the UK data and the U.S. policy decision so markets are happy to play the ranges,” said a sales trader at a U.S. bank in London.

Sterling has pulled itself up from a six-month low hit last month as investors pared back some bearish bets and a dollar rally ran into some headwinds and investors have pared back some bearish bets against the pound.

Annual UK inflation is expected to have edged up in May to 2.5 percent, well above the Bank of England’s target of 2 percent. The data is due at 0830 GMT.

Money markets currently price in a 44 percent chance of a 25 basis point hike in August and barely one rate hike by end-2018.

Against the euro, sterling was trading 0.2 percent weaker at 87.99 pence. (Reporting by Saikat Chatterjee; editing by John Stonestreet)

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