* 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, Nov 17 (Reuters) - Sterling rose on Friday and is set for a second consecutive week of gains as investors covered their short positions before the weekend with Britain’s path out of the European Union looking complicated.
“The UK government is definitely struggling with the (EU) Repeal Bill in the House of Commons, and it seems the market still looks at any softening of the Brexit stance or even a small increase in the chances of it not happening as a GBP positive,” said John Marley, head of FX strategy at Infinity International, a currency risk management firm.
Sterling rose half a percent to hit a 2-1/2 week high of $1.3260 as broad dollar weakness also bolstered the pound’s gains.
The dollar slipped to a four-week low against the yen on Friday, after a newspaper report that investigators probing possible Russian interference in the 2016 U.S. election had subpoenaed President Donald Trump’s election campaign for documents.
Britain will honour its commitments to the European Union, Prime Minister Theresa May said again on Friday, trying to reassure increasingly frustrated leaders who want London to spell out how much it will pay on Brexit.
However, sterling’s gains were also accompanied by a pick up in implied volatility, a gauge for expected price swings, in the derivatives market indicating the currency remained very sensitive to headline risk from the progress of Brexit negotiations.
Progress between European and British negotiators at the December summit in Brussels is seen as an important milestone in the Brexit talks, as businesses seek clarity on the terms of the divorce by the new year, when many will make investment decisions.
Data this past week offered hardly any support to sterling.
UK consumer price inflation was at 3.0 percent in October, lagging expectations, while the number of people in work in Britain fell by the most in more than two years in the three months to September.
Both indicators would support a view that further interest rate rises by the Bank of England would come at a slow pace.
Against the euro, sterling managed to chalk up some tiny gains with the British currency edging higher to 89.02 pence.