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UPDATE 1-Pound languishes in red as EU delays Brexit extension verdict

Elizabeth Howcroft

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Adds EU decision)

LONDON, Oct 25 (Reuters) - Sterling edged down on Friday as the European Union failed to set a date for Britain's departure from the bloc while the UK parliament squabbled over Prime Minister Boris Johnson's call for an election to break the deadlock.

EU ambassadors agreed in principle to a delay beyond the Oct. 31 deadline, but will not decide the length of the extension until Monday or Tuesday, an official said.

The pound fell slightly on the news and by 1130 GMT it was down 0.25% against the dollar at $1.2823, though it held above the one-week low of $1.2790 hit on Thursday after Johnson called for an election.

Versus the euro, it slipped 0.4% at 86.66 pence.

"It seems like (there is) this weird feedback loop of uncertainty from the UK parliament leading to the EU not making a decision, leading to the uncertainty in the UK parliament," said Jordan Rochester, FX strategist at Nomura.

Sterling is down 1.3% so far this week, ceding half the gains made last week when it rallied the most in two years. It is still up 5% to the dollar this month as risks of a no-deal Brexit have tumbled.

Johnson's spokesman said the government would push ahead with Brexit if lawmakers did not agree to an election . Labour leader Jeremy Corbyn says he will only support an election if a no-deal Brexit is taken off the table.

Meanwhile sterling's upside should be limited.

Thu Lan Nguyen, FX strategist at Commerzbank, noted the risk of "running round in circles".

"We will see more volatility if we have more elections in December - as soon as the date's set and decided I would expect implied volatility in the one- to two-month horizon to rise again," she said.

Sterling-dollar implied volatility - expectations of future price swings - on a one-month maturity were down to 9.15% on Friday, the lowest in five-weeks. But the three-month contract inched to a four-day high at 10.2%, as election jitters and fear of prolonged Brexit uncertainty crept in. (Reporting by Elizabeth Howcroft, editing by Larry King and Chizu Nomiyama)