* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
LONDON, Oct 16 (Reuters) - The pound rose towards $1.32 on Tuesday as investors prepared for a European Union summit where diplomats will try to pave the way for an agreement on Brexit.
Traders have been unwinding short positions on sterling, in part because they see a growing chance of a breakthrough at Wednesday’s EU summit in Brussels.
With only six months before Britain leaves the EU, major obstacles remain to securing an agreement, including how to keep an open border between the British province of Northern Ireland and the EU member Ireland.
The pound rose 0.3 percent to $1.3197 against the dollar. It gained 0.1 percent to 87.85 pence against the euro .
Traders are also focused on a labour market report due at 0830 GMT. It is expected to show the unemployment rate was unchanged at 4 percent in August and average earnings rose 2.9 percent, in line with the previous period, according to a Reuters poll.
“The increased likelihood of the deal not being reached during the upcoming EU Summit limits the positive spill-over from solid UK data into GBP,” said Petr Krpata, an currency strategist at ING. (Reporting by Tom Finn, editing by Larry King)