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Sterling hits 3-1/2-month high vs euro, eyes on manufacturing 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, Nov 1 (Reuters) - Sterling hit a 3-1/2-month high against the euro on Wednesday as investors focused on a Nov. 2 Bank of England policy decision they expect will produce the first interest rate hike in over a decade.

Traders will also be keeping a close eye on a manufacturing purchasing managers survey (PMI) to be released at 0930 GMT for clues on whether Thursday's likely rate increase could lead to a longer-term tightening cycle.

However, the data is unlikely to swing the BoE's rate-setters, who have started to gather ahead of Thursday's meeting, analysts said.

"Its forward-looking information but its not going to materially move the needle," said Jordan Rochester, analyst at Nomura.

"It really would need to be a big surprise either way to elicit a sterling reaction, because ... the BoE won't really be factoring that into their decision," he added.

Figures from mortgage lender Nationwide on Wednesday showed British annual house price growth edge up to a three-month high in October, although the outlook for the housing market remained subdued.

Sterling topped $1.33 for the first time since Oct. 16 on Wednesday, trading 0.2 percent up on the day at as high as $1.3311.

Against the euro it was up a quarter of a percent on the day at 87.46 pence, the highest level for sterling since July 17.

Signs of progress in Brexit talks have given a boost to sterling this week, including comments by the European Union's chief Brexit negotiator Michel Barnier, who said on Tuesday he was ready to move onto the next stage of talks.

"(But) behind the scenes in London things are still simmering though as the government still does not seem to agree about its future course. As a result I would treat the current Sterling rally with great caution," Antje Praefcke, an analyst at Commerzbank, wrote in a note to clients. (Reporting by Polina Ivanova; Editing by Janet Lawrence)