* 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, March 6 (Reuters) - Sterling slipped to a seven-week low against the euro on Monday, weakened by uncertainty over when the formal mechanism for Britain’s departure from the European Union would be triggered, as well as a run of weak UK data.
Prime Minister Theresa May faced her first defeat over her plan to trigger Brexit last week, when parliament’s upper house voted for a change that says she can only trigger divorce talks if she promises to protect EU citizens’ rights.
The vote was a blow to May, who had hoped to pass her Brexit bill without changes. It will also push back the earliest date she can formally begin the process of Britain’s departure to around March 13. “Markets want to see the triggering of Article 50 sooner rather than later, because then they get clarity over uncertainty - that got pushed away last week when the Lords pushed back the bill to the House of Commons,” said ING currency strategist Viraj Patel.
“Markets are now more focused on the endgame,” he added. “It’s now an inevitability, so they are focused on what the picture looks like post-Brexit.”
Sterling slipped to 86.69 pence per euro, its weakest since Jan. 19.
By 1005 it had recovered to 86.44 pence, still down 0.1 percent on the day. The single currency fell on news that former French prime minister Alain Juppe would not run in the French elections, which investors saw making a victory by the far-right Marine Le Pen more likely.
A weaker-than-expected survey on Friday from Britain’s dominant services sector added to a sense that the British economy’s resilience since last June’s Brexit vote may be starting to fade, setting a weak tone for sterling.
Worries about a fresh Scottish independence referendum also weighed, and sterling hit a seven-week low on Friday of $1.2215. It stayed close to that on Monday at $1.2259, down 0.3 percent.
Analysts said, though, that the more than 2 percent fall against the dollar last week was largely caused by the U.S. currency’s strength. It has been boosted by revised expectations for when U.S. interest rates will rise - investors are now pricing in an 86 percent chance rates will rise in March, Reuters data show.
In contrast, the Bank of England looks set to keep rates at their record lows while Britain starts negotiating its departure out of the EU.
“The central bank is likely to continue linking its policy stance to longer-term and Brexit-related uncertainty,” wrote Credit Agricole currency strategists in a research note.
“Such capped BoE monetary policy expectations, coupled with intact uncertainty as related to Brexit, is likely to keep sterling subject to downside risks.” (Editing by Larry King)