UPDATE 1-Sterling climbs towards $1.27 after UK services data beats forecast

Sterling rose on Friday after suffering heavy losses spurred by fears of a global economic slowdown, but uncertainty about Brexit kept its gains in check.

The pound sank to its lowest since April 2017 on Thursday after worries about the health of the global economy and particularly China sparked an investor exodus from currencies considered riskier.

But the currency staged a modest recovery on Friday, rising 0.3 percent against the dollar to $1.2670 and remaining close to the bottom of its long-term range.

Versus the euro, it rose 0.2 percent to 90 pence.

The pound edged up after a survey showed Britain's dominant services sector rose slightly more than forecast.

Friday's figures also indicated that disarray over Brexit is starting to affect the economy and the housing market is stalling.

"The services data is unlikely to help GBP much today. Sterling is chiefly driven by Brexit uncertainty," ING FX strategist Petr Krpata said.

Reduced expectations for a Bank of England interest rate rise in 2019 are also weighing on the pound, as are concerns about whether British Prime Minister Theresa May can convince lawmakers to back her Brexit withdrawal arrangement before a scheduled departure date in March.

A parliamentary debate on May's deal with Brussels kicks off next week, with a vote scheduled for the week of Jan. 14. (Reporting by Tom Finn; Editing by Angus MacSwan)

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