Sterling holds early gains as traders focus on drawn-out Brexit talks

* Sterling up 0.1% vs the dollar, flat vs the euro

* Graphic: World FX rates in 2020

* Graphic: Trade-weighted sterling since Brexit vote

LONDON, Nov 17 (Reuters) - Sterling edged higher against the dollar and steadied versus the euro on Tuesday as traders awaited news on the progress of trade talks between Britain and the European Union.

Britain’s chief negotiator David Frost has told Prime Minister Boris Johnson to expect a Brussels trade deal “early next week”, The Sun reported on Monday, with “a possible landing zone” as soon as next Tuesday, the report said.

That had followed news last week that Dominic Cummings, one of the political architects of the Brexit project was set to leave the government, leading some observers to predict a greater chance of a deal.

After a brief burst of optimism overnight, however, the pound was marginally higher in early London trading.

At 0836 GMT, the pound was up nearly 0.1% against the dollar at $1.3213, aided by a broad-based weakening of the U.S. currency as COVID-19 cases surge. Versus the euro, the pound was unchanged at 89.820 pence per euro.

“The GBP reaction was moderate. With the exception of some volatility very early in Asian trading euro-sterling, in particular did not react at all,” Commerzbank analyst Ulrich Leuchtmann said in a note to clients.

“I have been guessing for a while that the market is assuming a doable postponement of the Brexit deadline as the central scenario. And as a result, the recent news is confirmation of the predominant market view rather than cause to revalue the GBP exchange rates.” (Reporting by Simon Jessop; Editing by Saikat Chatterjee)