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Sterling flat versus dollar as markets digest rate moves

LONDON, March 18 (Reuters) - The British pound was little changed against the U.S. dollar but rose against the euro on Friday, a day after the Bank of England increased its interest rate for the third consecutive meeting but softened its language over future tightening plans.

Sterling was flat against the dollar at $1.3135 but was still on track for its first positive week in four.

Against the euro, the pound rose 0.1% to 84.23 pence but was still heading for its second consecutive weekly loss versus the single currency.

The Bank of England followed the U.S. Federal Reserve in raising rates this week but analysts at Bank of America think that the differing message from the two central banks will fail to provide support to the pound.

“The contrast in tone between the Fed and Bank of England could not be starker and goes to the heart of why we think that UK rate hikes will not provide a boost to GBP,” Bank of America said.

Money markets are pricing in another 116 basis points of tightening from the BoE and 162 basis point of tightening from the Fed by the end of the year.

With some semblance of clarity provided by the major central banks, attention is set to return to geopolitical developments.

“With three major central bank decisions now behind us, the market is likely to revert to trading headline risk and geopolitics,” Bank of America added.

A fourth straight day of talks between Russian and Ukrainian negotiators took place on Thursday, but the Kremlin said an agreement was yet to be reached.

Reporting by Samuel Indyk; Editing by Robert Birsel

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