* 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 Jemima Kelly
LONDON, July 3 (Reuters) - Sterling steadied just above $1.30 on Monday, staying close to a six-week high, as traders eyed data from Britain's manufacturing sector for a steer on whether bets that the Bank of England will hike interest rates this year are justified.
The pound recorded its best weekly performance against the dollar in almost eight months last week. It climbed almost 2.5 percent to reach as high as $1.3030 after BoE Governor Mark Carney said a rate rise was likely to be needed as the economy came closer to running at full capacity, and that the Bank would debate this in the coming months.
For the quarter, sterling's performance was its best in two years, benefiting from broad dollar weakness as U.S. economic data disappointed and as investors' hopes for pro-business, pro-growth policies from President Donald Trump faded.
Following Carney's comments - which were followed by similar remarks by the BoE's chief economist Andy Haldane - investors moved to price in around a 50 percent chance of a rate hike by the end of the year.
But not all analysts are convinced that the BoE will follow through with its hawkish rhetoric as Britain negotiates its way out of the European Union. Even if rates increase slightly, that will not necessarily spell the start of a steady policy tightening cycle, they say.
"What may have been a subtle attempt by BoE officials to put the question of policy normalisation onto the table has in fact led to markets now pricing in odds of a 2017 rate hike equivalent to a coin toss," wrote ING currency strategist Viraj Patel in a note to clients.
"(But) even if the post-Brexit 25 basis point rate cut is reversed, structural impediments are likely to keep UK interest rates anchored at historically low levels and this points to limited sterling upside from BoE policy."
Patel said July's macro data would be "the biggest test of this hawkish exuberance" and that the bank expected this week's purchasing managers' index (PMI) surveys to point to a summer slowdown. The manufacturing sector PMI is due at 0830 GMT.
Speculators had increased their short positions on sterling in the week up to last Tuesday, before the BoE's latest comments.
Sterling was 0.1 percent lower on the day ahead of the manufacturing data at $1.3010. Against the euro, it was flat at 87.62 pence.
"With the UK edging into the mature stage of the economic cycle and political noise around Brexit set to act as a catalyst for volatility, we see relatively limited short-term upside," anaylsts from BMI Research wrote. (Editing by Andrew Heavens)