Sterling supported by UK data, on track for weekly gains

(Updates with UK data, adds quote)

LONDON, Sept 9 (Reuters) - Sterling was firm on Friday, on track for its fourth straight week of gains against the dollar, as investors trimmed bets against the currency after data showed the country's yawning trade gap shrinking in July.

Overall trade deficit narrowed to 11.764 billion pounds from 12.40 billion pounds as exports outpaced imports, and broadly in line with expectations. The Office for National Statistics, however, said it was too soon to know if the sharp fall in sterling after Britain voted to leave the EU was behind the rise in export volumes.

Analysts said the shrinking trade gap bolstered hopes that external trade would make a positive contribution to overall growth in the third quarter and added to evidence of the economy's resilience, following the Brexit vote.

"The weak pound is making British exports a lot more competitive, which was one of the chief economic benefits promised by many Brexiters before the referendum," said Neil Wilson (Oslo: WILS.OL - news) , analyst at ETX Capital.

"However it's important to note, as the ONS does in its release, the very close correlation of import and export prices for the UK, which ought to limit the positive impact of a weak pound longer term."

Sterling was a tad higher at $1.3305 but trading well below a seven-week high of $1.3445 struck on Tuesday.

It was flat against the euro at 84.73 pence, having struck a one-week low of 84.95 pence on Thursday after ECB President Mario Draghi disappointed some investors by saying European Central Bank policymakers had not discussed an extension of its asset purchase plan.

Separately, construction volumes were unchanged in July after a 1.0 percent drop in June, a smaller fall than the average 0.8 percent decline forecast in a Reuters poll, the ONS said.

Nevertheless, sterling has been weakening since Wednesday, when Bank of England Governor Mark Carney reiterated to lawmakers that the central bank remained ready to take "whatever action is needed" to help the economy weather the aftermath of the Brexit vote.

On Wednesday, weak British manufacturing output data for July painted a less rosy picture of the aftermath of the June 23 EU referendum, serving a reminder to investors about the risks lurking.

The data were the first official figures to cover output solely for the period after the vote. Britain was plunged into political chaos in the weeks after the vote and before the formation of a new government under Prime Minister Theresa May.

"We still like being short sterling/dollar and long euro/sterling as the pound's bounce runs out of steam," said Kit Juckes, currency strategist at Societe Generale (Swiss: 519928.SW - news) . (Editing by Catherine Evans and Dominic Evans)