* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh * Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv LONDON, Oct 7 (Reuters) - Sterling steadied versus the dollar and euro on Thursday with the prospects of a Bank of England rate hike reduced downside potential for the currency, analysts said. Sterling has erased all of its strong 2021 gains as concerns weighed about British economic growth and rising inflation, as the country grapples with a fuel crisis. The British currency was flat versus the dollar at $1.3584 at 0838 GMT., after marching on Wednesday towards a December 2020 low touched last week amid a sharp rise in energy prices. Improved global risk sentiment on Thursday with oil prices bouncing back from multi-year lows and European stocks in positive territory, lent some support to the pound. But analysts said in separate notes to clients that the prospect of interest rate hike in Britain was what was preventing the pound from sliding further. “Prospects of higher rates in the UK are probably reducing the downside potential for GBP-USD,” UniCredit Research analysts said. “Although EUR-GBP attempts to slip below 0.85 are quite episodic”. The pound edged 0.1% lower versus the euro to 85.16 pence, after jumping to a mid-August high of 84.95 pence in the previous session. Markets currently price a roughly 90% probability of a 15 basis point rate rise in December and two hikes by June 2022. In the meantime, data from mortgage lender Halifax showed that British house prices rose by the most in almost 15 years in September ahead of the end of a tax break for house buyers and they were expected to continue their climb to new record high levels. [nL8N2R314D (Editing by Emelia Sithole-Matarise) Our Standards: The Thomson Reuters Trust Principles.