Sterling breaks 5-day losing streak on M&A play

* Pound recovers after five-day losing streak

* Helped by possible takeover of British drugmaker

* Brexit worries resurface

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Adds quotes, context, updates figures)

By Tom Finn

LONDON, April 24 (Reuters) - The pound gained on Monday, breaking a five-day losing streak, after news about a possible takeover of a British pharmaceutical company encouraged investors to put concerns about the British economy to one side.

Weaker-than-expected wage growth and inflation data and comments last week from the Bank of England that sowed doubt over a May interest rate hike triggered a selloff in sterling which slid to its lowest since mid-March in early trading.

But the currency jumped on Tuesday after Japan's Takeda Pharmaceutical sweetened a 44 billion-pound ($61.4 billion) bid for London-listed drugmaker Shire (Xetra: S7E.DE - news) ahead of a deadline on Wednesday.

"It's an inflow story. If the deal goes ahead and Takeda buys the company in sterling that will lift the currency a bit," said WorldFirst FX strategist Jeremy Cook.

"The UK's corporate crown jewels are on sale and because of the devalued pound these kinds of acquisitions could become more commonplace," he said.

April has historically proved to be supportive for the pound because of a seasonal rise in capital inflows into Britain from foreign companies paying UK shareholders dividends.

But last week, sterling fell almost 1.7 percent on cautious comments from Bank of England Governor Mark Carney that slashed market expectations for a May rate hike.

The pound was up 0.3 percent on Tuesday at $1.3973 but remained near its lowest since March 19, in part because of a broadly stronger dollar, analysts said.

"Rising U.S. yields have given the dollar a powerful lift in recent days. If the U.S. dollar were to stage a significant further rally, cable could be among the worst casualties," said Societe Generale (Swiss: 519928.SW - news) currency strategist Alvin Tan.

The dollar index hit a three-month high of 90.985 against a basket of six currencies, as benchmark 10-year U.S. Treasury yields briefly scaled the psychological 3 percent mark.

Against the euro the pound was up 0.1 percent at 0.8748.

A resurfacing of worries about Brexit also sapped at the pound, which has been one of the best performing major currencies in 2018.

Britain's upper house of parliament handed the government its third defeat over Brexit in less than a week on Monday, voting down plans not to retain EU rights in national law before Britain leaves the bloc.

The cross-party vote was technical and non-binding but shows the deep divisions over Brexit across the Houses of Parliament and adds to speculation that Prime Minister Theresa May's leadership could come under threat.

The market is now pricing in a less than 50 percent chance of a rate hike at a May 10 BoE (Shenzhen: 000725.SZ - news) meeting, down from more than 80 percent a fortnight ago.

Analysts said they would watch gross domestic product figures due later in the week for signs of how the economy was holding up and whether it pointed to a BoE ready to hike rates. (Editing by Saikat Chatterjee and Alison Williams)