March 23, 2018 / 9:32 AM / 4 months ago

Sterling set for biggest weekly rise in six weeks; risks lurk

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

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

LONDON, March 23 (Reuters) - Sterling consolidated gains after posting its biggest weekly rise in six weeks, as investors pondered the outlook for the currency amid threats of a global trade war.

The pound has enjoyed a good week, with Britain and the European Union agreeing on a transition period after Brexit and the Bank of England paving the way for a rise in interest rates in May.

Sterling was flat at $1.41 and is on track to post its biggest weekly rise in six weeks. It was up near 1.2 percent this week.

“The repricing story for sterling is all done and all the cards have now fallen in place for the short term, but any trade war outbreak will be a significant headwind,” said Viraj Patel, an FX strategist at ING in London.

U.S. President Donald Trump signed a memorandum on Thursday that will target up to $60 billion of Chinese products with tariffs, but only after a 30-day consultation period that starts once a list of goods is published.

The pound will be caught in the crossfire of any global trade war, since Britain has a large deficit for which it needs capital inflows.

The Bank of England kept interest rates steady on Thursday but two policymakers voted to raise them, reinforcing the view among economists that borrowing costs will rise in May for only the second time since the 2008 financial crisis.

Against the euro, sterling weakened with the single currency rising 0.23 percent at 87.46 pence. (Reporting by Saikat Chatterjee; editing by Larry King)

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