LONDON, April 10 (Reuters) - The pound fell slightly on

Friday but was still set for its biggest weekly increase in

three months after the U.S.-Iran ceasefire raised hopes for an

end to a conflict that has sent energy prices soaring and

threatened global growth.

Sterling slipped 0.15% to $1.342 but was on track

for a weekly increase of 1.7%, the biggest such rise since

mid-January.

The pound rallied 0.7% on Wednesday after U.S. President

Donald Trump announced an agreement on a two-week ceasefire that

would see Iran reopen the key Strait of Hormuz, through which

20% of global oil and liquefied natural gas shipments typically

flow.

However, the ceasefire was looking fragile on Friday, a day

before negotiations were due to take place in Pakistan. Trump

said Iran was doing "a very poor job" of letting oil through the

strait and Israel continued to strike Lebanon.

"Financial market moves overnight generally have been

relatively modest," said Lloyds Bank analysts Sam Hill and

Nicholas Kennedy in a research note.

"It looks like markets are pinning their hopes on positive

developments in negotiations in Pakistan over the weekend."

The pound fell 1.9% against the dollar in March as energy

prices shot higher and stock markets tumbled, pushing investors

towards the U.S. currency, which is seen as a safe haven in

times of stress.

Britain's economy is also highly reliant on energy imports,

adding to the pressure on the pound in March as investors braced

for a hit to growth.

Yet the dollar index, which tracks the currency

against six peers, was on track for its biggest weekly fall

since mid-January on Friday as investors sold the greenback to

move back into stocks, bonds and other currencies.

The euro was little changed against the pound on

Friday at 87.06 pence. It has fallen around 0.7% against

sterling since the war began as traders have tried to gauge who

will take the biggest economic hit.