UPDATE 1-Bank of England in focus as sterling hits 11-month highs

* Graphic: sterling and gilt yields http://bit.ly/2dgAXn1

Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Recasts after services PMI, adds quotes, details, updates prices)

By Jemima Kelly

LONDON, Aug 3 (Reuters) - Sterling climbed to an 11-month high against the dollar on Thursday after data from the services sector came in stronger than expected, as traders looked to a Bank of England policy decision for a steer on when interest rates might be raised.

The BoE looks set to keep interest rates at a record low once again, but investors are looking out for signs that it is getting nearer to raising rates for the first time in a decade.

With unemployment at a four-decade low and inflation above the Bank's target, the case had seemed to be growing for the BoE to at least reverse the emergency 25 basis-poing rate cut it made after last year's shock vote to leave the European Union.

But a raft of weaker data since June has called that view into question, with recent figures showing the economy had its slowest growth since 2012 in the first half of this year. Inflation has also dipped, and growth in wages remains weak.

The purchasing managers' index (PMI) survey for Britain's dominant services industry, therefore, which showed a slight pick-up in July to 53.8, came as a relief to those worried about an economic slowdown.

"The trend for UK data recently has been more on the downbeat side and the overall structural direction looks a bit weaker...so that was an encouraging side that we got a beat," said Mizuho's head of hedge fund FX sales, Neil Jones.

"Were still comfortably above the 50 level that separates growth from contraction."

Jones said the services PMI in itself would not be in itself enough to affect the BoE's vote on rates later on Thursday, but that it was a "key measure" that policymakers looked at.

Having been trading around $1.3232 before the data, sterling rose to as high as $1.3267 after its release, up a third of a percent on the day.

Against the euro, it climbed 0.4 percent to 89.25 pence.


Investors expect policymakers to vote 6-2 in favour of keeping rates unchanged. At the last meeting, three rate-setters voted for a hike, but one, Kristin Forbes, has since departed, and has been replaced by the more dovish Silvana Tenreyro.

Chief Economist Andy Haldane said soon after the last meeting that he was close to voting for a hike too, adding to speculation that he might join those calling for a hike, and that the BoE could soon be ready to follow the lead of the U.S. Federal Reserve and raise borrowing costs.

For a Reuters graphic on views of the Monetary Policy Committee's members, click on: http://tmsnrt.rs/2eSYykb

But as well as weaker data, divorce talks between Britain and the rest of the EU have had a stumbling start, leaving many firms nervous about the risk of a damaging Brexit in 2019.

"I do not expect the outcome of todays meeting to result in a rate hike," said FXTM strategist Hussein Sayed.

"Firstly because consumer prices (have) slipped... Secondly, theres still no clear transition deal for Britains relationship with the EU after Brexit. I believe these two factors will keep the BoE on hold for now, but this does not necessarily mean the rally in sterling is over." (editing by John Stonestreet and Angus MacSwan)