* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Updates prices, adds chart, quote and context)
By Olga Cotaga
LONDON, Sept 23 (Reuters) - Sterling held steady on Monday
as investors looked for signs of progress in Britain's Brexit
talks and awaited a Supreme Court ruling on whether Prime
Minister Boris Johnson misled Queen Elizabeth over his reasons
for suspending parliament this month.
Traders will be looking for any movement in Britain's
negotiations on leaving the European Union when Johnson meets
European leaders on the sidelines of a United Nations General
Assembly in New York.
Expectations for such progress were low, however, and the
substantial volume of short positions already built up on
sterling may shield the currency from any sharp declines,
analysts said.
Johnson is expected to meet European Council President
Donald Tusk as well as German and French leaders Angela Merkel
and Emmanuel Macron while he is in New York.
"We are sceptical of much in the way of progress being made
and on top of that there is also the risk of PM Johnson having
to cut his trip short to return to London if the Supreme Court
decision goes against the government," said MUFG analysts in a
note to clients.
Johnson suspended - or prorogued - the British parliament
for five weeks until Oct. 14 in a tactical move seen by critics
as an attempt to stop MPs from preventing Britain leaving the
bloc on Oct. 31. Scotland’s highest court of appeal ruled the
suspension unlawful, but Johnson appealed.
The Supreme Court said it will issue its decision at 0930
GMT on Tuesday.
If it rules against the government it would increase
political uncertainty in the country and "weigh on sterling a
little," said Jeremy Stretch, head of G10 forex strategy at
CIBC.
The collapse of British travel firm Thomas Cook
could also put some pressure on the pound as it highlighted the
weakness of the British retail sector, Stretch said, adding that
he sees "a drift lower for cable (pound/dollar) for now."
Sterling/dollar will likely trade around "$1.23 in the short
term," Stretch said.
By 1130 GMT, the pound was down 0.2% at $1.2448,
having dropped earlier to a six-day low of $1.2420, mostly due
to broad-based dollar strength.
The dollar index was up 0.2% at 98.68 after rising
earlier to a 1-1/2 week high of 98.832.
Against the euro, the pound was up 0.1% at 88.235 pence
.
Hedge funds have trimmed slightly their holdings of short
positions on the pound to $6.73 billion in the week to Sept. 17,
according to the Commodity Futures Trading Commission, but the
amount was still close to the two-year high of $7.81 billion it
reached last month.
Last Thursday the pound hit a two-month high after European
Commission President Jean-Claude Juncker said a Brexit deal was
possible. But on Friday traders' optimism dissipated and
sterling pulled back after Irish Foreign Minister Simon Coveney
said London and the European Union were not yet close to a
Brexit deal.
"In terms of Brexit news, the outlook for sterling is still
binary," said Jane Foley, senior currency strategist at
Rabobank.
"If optimism is extended, euro/sterling can be expected to
push back below the 0.88 level this year. By contrast, if hopes
that a deal could still be in place by the end of next month are
snuffed out, euro/sterling could be re-setting its sight on the
0.90 level and potentially above," Foley said.
(Reporting by Olga Cotaga; Editing by Hugh Lawson)