Sterling steadies, with focus on Fed and UK retail sales

LONDON, December 12(Reuters) - Sterling was steady against the dollar on Tuesday as traders readied for an interest rate cut from the U.S. Federal Reserve and October GDP data for a steer on the UK economy.

At 1231 GMT the pound was unchanged against the dollar at $1.332 and flat against the euro at 87.335 pence . The dollar was similarly steady across the board ahead of the Fed's rate decision and a pivotal 2026 for the central bank.

Antonio Ruggiero, FX and macro strategist at Convera, said sterling is holding above $1.33 for now, but support looks fragile ahead of the Fed meeting and could slip if Jerome Powell, the Fed chair, sounds hawkish.

Also supporting sterling is finance minister Rachel Reeves' more positive than expected budget. The currency has added 1.2% since Reeves delivered the budget on November 26 and climbed to six-week highs last week.

"The move followed as the long end of the gilt yield curve was hollowed out of months-long accumulated risk premium," said Ruggiero. But the run-up to the budget also fed through to retail sales. Surveys released on Tuesday showed British consumers kept a tight rein on spending in November as they awaited the budget while retailers said that Black Friday sales disappointed.

Markets are placing a roughly 86% chance of the Bank of England cutting interest rates by a quarter of a point to 3.75% at its next meeting on December 19.

Traders are also awaiting UK GDP figures for October, which are due on Friday.

(Reporting by Lucy Raitano in London and Ozan Ergenay in Gdansk Editing by David Goodman)