•  Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
•  Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

LONDON: Sterling rose to a seven-week high on Thursday as traders prepared for British retail sales data and a Bank of England meeting at which the central bank is expected to flag a rate rise in May.

The pound, helped by a dollar that weakened overnight following the US Federal Reserve meeting, has rallied this week after the European Union and Britain agreed a Brexit transition deal and wage growth hit its fastest pace in almost 2-1/2 years.

With more clarity about Brexit talks and wages growing almost as much as inflation, the BoE looks to have its path cleared for a rate hike in May.BOE me

Sterling rose as much as 0.3 percent to $1.4177, its highest level since Feb. 2, before falling back to trade up 0.1 percent at $1.4162.

Against the euro, the pound was flat, trading at 87.275 pence per euro.

"The odds of a more hawkish tilt at today's Bank of England policy meeting have risen materially following what has been a relatively constructive week of Brexit developments and UK data," said Viraj Patel, a strategist at ING.

Patel said any suggestion of two rate hikes in 2018 could push sterling above $1.42 against the dollar.

The pound in January hit its highest level, at $1.4346, since the vote to leave the EU in June, 2016 before traders decided the British currency had been overbought.

British retail sales data are due at 0930 GMT, with analysts polled by Reuters expecting year-on-year growth in February to have slowed to 1.3 percent from 1.6 percent in the prior period.