Sterling holds steady vs dollar, UK data may weigh

LONDON: Sterling held steady against the dollar on Tuesday but it remained vulnerable to euro zone debt concerns while weak UK data could also put it under pressure.

UK industrial production and manufacturing data was due at 0830 GMT. A weaker-than-forecast reading would increase speculation that the Bank of England may opt for another bout of quantitative easing and would weigh on the pound.

But analysts said sterling was likely to remain mostly driven by events elsewhere, with concerns about Spain's debt problems and caution ahead of elections in Greece at the weekend likely to support the dollar and pressure riskier currencies.

The pound was expected to stay supported against the euro, however, as market players seek alternatives to the common currency.

Sterling was steady against the dollar at $1.5468, staying below a one-week high of $1.5601 struck on Thursday.

Traders cited talk of bids around $1.5460, where the pound also had support from a trendline drawn from the June 1 low of $1.5269.

"Clearly investors are nervy of more QE in the UK, which hangs in the balance, but the industrial production data may have to be significantly weaker to elicit a decent response in sterling," said Simon Smith, economist at FXPro.

 He added that nervousness before the Greek election would probably push sterling lower against the dollar and keep it well supported against the euro, which he said was likely to move back down towards the 80 pence mark.

 UK industrial output was forecast to rise by 0.1 percent month-on-month in April, while manufacturing output was expected to be flat.  

The euro was steady at 80.58 pence, well below a high of 81.63 pence hit on Monday, its strongest level since early May, when the euro gained a short-lived boost in response to a bailout deal for Spain's banks over the weekend.

But the initial optimism quickly faded as concerns remained about Spain's long-term access to markets.

Investors were also turning their attention to Greek elections, where a victory for far-left anti-bailout parties could push Greece towards a chaotic exit from the euro zone.