Sterling edges lower after UK inflation data, Brexit fears weigh

* Graphic: World FX rates in 2019

* Graphic: Trade-weighted sterling since Brexit vote

LONDON, June 17 (Reuters) - Sterling was slightly weaker on Wednesday after data showed inflation fell to its lowest level since June 2016 last month as the coronavirus pandemic sucked demand from the global economy and caused oil prices to tumble.

Low inflation would give the Bank of England space to ramp up its stimulus programme again when its policymakers meet on Thursday. The British central bank is expected to announce a fresh increase of at least 100 billion pounds ($125.71 billion) in its bond-buying firepower.

Sterling was last trading down 0.2% versus the U.S. dollar and the euro, at $1.2564 and 89.73 pence respectively.

The pound has risen more than 4% against the greenback in the last three months, but is still far off levels seen before the new coronavirus sent global markets tumbling in March.

It is also much lower in trade-weighted terms than it was before the Brexit referendum in June 2016.

Brexit uncertainties are still weighing on the pound, but leaders from Britain and the European Union agreed on Monday that talks on their future relationship should be stepped up. British Prime Minister Boris Johnson suggested an agreement could be reached in July.

“The pound’s weakness may reflect continued scepticism about the likely outcome of the Brexit negotiations,” said Marshall Gittler, head of investment research at BDSwiss Group.

With a status-quo transition deal set to expire at the end of the year, Britain is seeking a free-trade agreement with the EU, which it left on Jan. 31, but negotiators have so far made little progress.

Talks on the future relationship will enter a hot phase from September, a German government document reviewed by Reuters showed. ($1 = 0.7955 pounds)

Reporting by Olga Cotaga; Editing by Catherine Evans