December 21, 2018 / 10:12 AM / 5 months ago

Sterling heads for best week in seven but Brexit concerns still weigh

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

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

LONDON, Dec 21 (Reuters) - The British pound was steady on Friday after the British economy was confirmed to have grown at its fastest rate since 2016, with trading quiet ahead of the holiday period and a parliamentary vote in January on the prime minister’s Brexit deal.

Sterling has gained this week, largely on the back of broad dollar weakness but also on signs that the British economy is holding up relatively well ahead of Brexit.

Retail sales data came in far better than expected on Thursday and data on Friday showed that the British economy was 0.6 percent larger year-on-year in the third quarter.

The pound rose 0.1 percent to $1.2674 in early European trading, bringing its week-to-date gains to 0.7 percent. That put sterling on track for its best weekly rise in seven weeks.

Against the euro, sterling gained 0.3 percent to 90.215 pence.

Despite the Brexit concerns, some foreign exchange analysts are predicting a bounce for sterling.

“According to our long-term valuation models for EUR/GBP, a fundamentally reasonable level for the currency pair would be around 0.75 instead of around 0.90 (pence per euro), said SEB analysts.

“Simply taking the expected EUR/GBP reactions in each one of the different alternative Brexit scenarios and the probabilities it would play out gives an expected value for EUR/GBP of 0.85.”

Traders are predicting a volatile period for sterling in January, when Prime Minister Theresa May will seek parliamentary approval for her much-criticised Brexit deal.

Fears have grown that the United Kingdom will quit the European Union in March without a transition deal to minimise disruption. (Reporting by Tommy Wilkes; Editing by Kevin Liffey)

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