* 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 Patrick Graham
LONDON, Aug 17 (Reuters) - Sterling edged past 91 pence per euro on Thursday after a mixed batch of UK retail sales figures helped investors put aside nerves over the economy and Brexit talks that have driven the currency to its weakest since October.
Month-on-month the sales numbers were marginally higher than forecast although headline year-on-year growth dipped to 1.3 percent from a revised 2.8 percent a month earlier and compared to forecasts of 1.4 percent.
That helped soothe the nerves over the economy which have quashed any expectations of a rise in interest rates over the next year - even if it did not point to any greater strength in the pipeline.
The pound gained 0.2 percent on the day to 91.10 pence per euro, but was flat against the dollar at $1.2883.
“For the second day running the pound has received a positive boost from an economic release, however just like on Wednesday it has failed to sustain a rally,” said David Cheetham, an analyst with broker XTB in London, pointing to a downward revision of June’s numbers as another negative.
“Once traders digested the revision lower the move was pared and the pound remains close to its 1-month low against the dollar, despite dollar weakness ... and not far from its lowest level since last October against the euro.”
Sterling on Wednesday fell to its weakest against the euro since last October’s short-lived “flash crash”.
Noise around Britain’s strategy for leaving Europe and the talks on the issue with Brussels have provided little positive for investors worried that the process is becoming increasingly chaotic and may do longer-term damage to the economy.
Sky News, citing unidentified sources, reported on Wednesday that the two sides may have to delay talks on their post-Brexit relationship until December as sufficient progress may not be made on the first stage of talks.
For now positioning data and options market pricing suggests hedge funds have backed away from plays on more sterling weakness.
”Positioning is remarkably light,“ said the head of hedge fund sales with one large international bank in London. ”I can only think of one fund that has any position at all and they are changing it very regularly meaning they are not entrenched.
“The problem is the conflicting pulls on sterling. We have inflation and the potential for rate hikes plus the short term inflows into the economy pulling it upward versus a more bearish medium term view of growth.”
Editing by Andrew Bolton