* 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
LONDON, Dec 15 (Reuters) - Sterling edged higher for a third consecutive day on Friday as investors bought the British currency on some optimism that Brexit negotiations will move to the next stage in January.
Still, investors were wary of buying the currency aggressively due to uncertainty over the broader outlook for the UK economy and as markets waited for more details on potential Brexit transition and trade agreements.
“I think it is too early for sterling to reprice a soft Brexit deal even though we have seen some progress,” said Morten Helt, an FX strategist at Danske Bank in Stockholm.
“To justify a break higher for sterling against the euro we need to see some concrete outlines of the trade and transition agreement.”
The leaders of the 27 countries remaining in the European Union will give the go-ahead on Friday for the EU’s chief negotiator Michel Barnier to begin talks with London on a transition period and future trade ties with Britain.
Sterling edged higher to $1.3427 against the dollar, marking a 0.3 percent gain for the week.
Against the euro, the British pound was broadly steady around 87.85 pence per euro.
With little support from the Bank of England (BoE), which on Thursday stuck to its view that interest rates were likely to rise only gradually despite above-target inflation, the key drivers for sterling are likely to be Brexit-related.
The BoE said in a statement that last week’s breakthrough in Brexit talks had reduced the risk of Britain leaving the EU in a disorderly way and might boost economic confidence.
Investors have turned slowly bullish on sterling in recent weeks, with net positioning data showing a gradual increase in long British pound bets, though any disappointment over Brexit negotiations may see sterling skid sharply lower. (Reporting by Saikat Chatterjee; Editing by Mark Potter)