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Sterling drifts higher before Carney, inflation data

* 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

LONDON, Oct 17 (Reuters) - Sterling drifted higher on Tuesday as investors awaited inflation data expected to play a defining role in setting the Bank of England's policy outlook in the coming weeks.

September data is due at 0830 GMT with markets expecting a rise in year-on-year inflation to 3.0 percent. Also on Tuesday, BoE Governor Mark Carney may offer further policy clues when he appears before a parliamentary committee.

August's 2.9 percent inflation reading was the joint highest level in more than five years and prompted the BoE to signal an interest rate hike in coming months in mid-September, triggering a market repricing.

Sterling rose 4 percent to a one-year high of $1.3659 in late September before giving up some of those gains in the subsequent days.

It was trading slightly higher at $1.3261 on Tuesday against a broadly stronger dollar.

Speculators trimmed their long positions on the pound - bets that it would rise - in the week to last Tuesday, data showed. But they were net-long on the currency for a third week running, having been short for almost two years.

A sceptical JP Morgan recommended investors buy euros against the pound as "the overhang of the Brexit issue itself would constrain how much accommodation the BoE would be able to remove."

With time ticking down to Britain's withdrawal from the EU in March 2019, Prime Minister Theresa May and European Commission chief Jean-Claude Juncker agreed in Brussels on Monday that the pace of Brexit negotiations should be stepped up.

Traders will also keep an eye on labour market data due on Wednesday and retail sales numbers on Thursday.

(Reporting by Saikat Chatterjee; editing by John Stonestreet)