* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
LONDON, March 9 (Reuters) - Sterling rallied on Friday after a slowdown in U.S. wage growth weakened the dollar and British industrial production data showed the UK's manufacturing sector continues to expand, albeit slowly.
Traders had earlier pushed the pound slightly lower as markets wait to get more clarity on Britain's Brexit negotiations with the European Union.
But when the dollar fell as data showed that despite the strongest U.S. jobs growth in 1-1/2 years, wage growth had fallen, the pound pushed higher.
The pound gained 0.4 percent to $1.3874. Sterling also rose against the euro and was up 0.3 percent at 88.85 pence per euro.
"There was some good and some bad 1/8in the industrial data numbers released on Friday 3/8 but nothing to scare the horses ahead of the spring statement next week," said Michael Hewson, chief analyst at CMC Markets. "Sterling is up because of dollar weakness."
British Finance Minister Philip Hammond on Tuesday gives his half-yearly update on the economy, known as the spring statement.
Analysts said with predictions of a Bank of England interest rate hike for May baked into the price, and ongoing political risks around Brexit negotiations, assessments of the health of the UK economy have taken a backseat for currency investors.
"The market is quite happy for there to be a rate hike in May. With that in the price, it dampens the impact of economic data," said Jane Foley, FX strategist at Rabobank. "The focus is on politics right now."
European Council President Donald Tusk said on Thursday the Brexit negotiations risk stalling if Britain does not present a realistic solution for the future of the Irish border, after London rejected an EU fallback proposal last week.
The EU this week also rebuffed Britain's post-Brexit trade demands and offered banks no special deal, underlining how far the two sides have to go before they can secure a trade accord.
Britain has said it will announce a transition deal - which will buy Britain and the EU time to decide their future relationship - later this month at an EU leaders summit.
But many investors remain sceptical that this can happen so soon. That uncertainty has weighed on sterling after the currency rallied at the start of the year. (Reporting by Tommy Wilkes, editing by David Evans)