* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
LONDON, June 1 (Reuters) - Sterling languished near a six-month low on Friday despite data showing UK manufacturing growth picked up speed in May for the first time in six months, as worries about Italy’s political crisis and new U.S. trade tariffs dominated the market psyche.
Stronger-than-expected economic data this week has failed to support the pound, which last traded flat against the dollar at $1.3303. It hit a six-month low of $1.3205 on Tuesday.
Against a weakened euro sterling was up 0.1 percent at 87.89 pence.
“The limelight is elsewhere right now and the UK economy is still quite hamstrung by slowing growth and Brexit concerns ... there’s plenty of places people would rather be investing than sterling right now,” WorldFirst head of FX strategy Jeremy Cook said.
The pound had been one of the best-performing currencies in 2018 but it has given up all its gains for the year following a broad rally in the dollar and signs Britain’s economy is slowing.
The currency suffered its biggest weekly decline versus the dollar in May since late 2016.
The main reason for sterling’s fall has been a drastic shift in market expectations for interest rate rises from the Bank of England (BoE) because of economic weakness.
Investors are pricing in a one-in-three chance of the BoE raising borrowing costs in August - the next time it updates its economic forecasts.
Still, investors are scrutinising business surveys to try to
get a sense of whether the UK economy is picking up in the second quarter after a sluggish start to 2018.
Risks around the sort of relationship Britain can agree with the EU for after Britain leaves the bloc continue to influence the pound.
The United Kingdom will attempt to break the deadlock in the Brexit negotiations with a proposal to give Northern Ireland joint UK and European Union status so that it can trade freely with both, a UK official said on Friday.
Northern Ireland, which will become the UK’s only land frontier with the European Union after Brexit in March 2019, remains the most difficult issue in talks between Brussels and London, and a threat to peace in the region. (Reporting by Tom Finn Editing by Louise Ireland)