Pound set for biggest weekly gain vs euro in 16 months on Brexit hopes
* Graphic: World FX rates in 2018
* Graphic: Trade-weighted sterling since Brexit vote LONDON, Jan 18 (Reuters) - The pound weakened on Friday after stellar gains this week that set the currency up for its biggest weekly gain against the euro since September 2017 on growing confidence that a no-deal Brexit can be avoided.
For now, focus turned to January retail sales data out at 0930 GMT for latest clues on the UK economic outlook, which has taken a back seat in recent weeks for traders.
In a tumultuous week for British politics, Prime Minister Theresa May's Brexit deal suffered a heavy defeat in parliament on Tuesday but she won a subsequent vote of confidence, removing some political uncertainty for now.
Having hit two-month highs on Thursday, sterling drifted lower in early Friday trade.
At 0830 GMT, pound was down a third of a percent at $1.2951 , having touched $1.30 on Thursday. Against the euro, sterling was down over a third of a percent at 87.99 pence and below two-month peaks hit a day earlier at around 87.65 pence.
"With each tick-up in sterling, it shows that markets are less and less concerned about a no-deal Brexit and less concerned about election risk," said Sarah Hewin, chief economist for Europe and Americas at Standard Chartered.
(Reporting by Dhara Ranasinghe; editing by John Stonestreet)