UPDATE 2-British blue-chips dented by sterling's brief Brexit uplift

* FTSE 100 dips 0.2%, FTSE 250 up 0.4%

* Housebuilders to two-month high

* Thomas Cook tumbles to record low

* Tobacco giants among biggest drags on FTSE 100
(Adds detail, updates price moves)

By Muvija M and Yadarisa Shabong

Sept 20 (Reuters) - Britain's exporter-heavy blue-chip index
lost ground as sterling hit multi-month highs after European
Commission President Jean-Claude Juncker said that a Brexit deal
is still possible.

The FTSE 100 dipped by 0.2%, registering its first
weekly loss in three, though sterling's early gains helped the
more domestically focused mid-cap FTSE 250 to firm by
0.4%.

Housebuilders, generally sensitive to Brexit
updates, were among those to benefit as the sector index reached
its highest in nearly two months on Juncker's apparent optimism.

The pound jumped to two-month highs but cooled later in the
session after the Irish Foreign Minister said that Britain and
the European Union were not yet close to agreeing a deal on
Britain's planned departure from the European Union.

That was too late in the day for the likes of Unilever
and Reckitt, which closed sharply lower,
ensuring the FTSE lagged global markets that were boosted by
monetary stimulus.

"If we do have a Brexit breakthough, the pound will gain but
that will weigh on the FTSE 100. It is like one step forward,
two steps backwards," said CMC Markets analyst David Madden.

Big tobacco companies BAT and Imperial Brands
dropped about 2% each after U.S. health officials said
there were now 530 confirmed and probable cases and seven deaths
from lung-related illnesses tied to vaping.

Traders said BAT shares were also pressured by a report by
Dutch evening newspaper NRC that the country's tax office was
seeking about 1 billion euros from the company for alleged tax
evasion.

Rolls-Royce ended 2% down after saying it will take
longer than expected to fix problems with its Trent 1000 engine
but had lost as much as 5% during the session.

Mid-cap financial services company Investec slumped
by more than 8% after warning that first-half profit will be
lower than a year ago because of restructuring costs and as
global trade tensions and Brexit also take their toll.

Among smaller companies, the world's oldest holiday company
Thomas Cook tanked 23% to a record low after saying it
needs 200 million pounds to satisfy its lenders, leaving it at
the risk of collapse in the next few days.
(Reporting by Muvija M and Yadarisa Shabong in Bengaluru
Editing by David Goodman)