Sterling edges up vs dollar, flat versus euro, Fed in focus

By Stefano Rebaudo

Dec 10 (Reuters) - Sterling edged up against the dollar and was roughly unchanged versus the euro as investors braced for the Federal Reserve policy meeting outcome due later in the session and data on British economic growth on Friday. The greenback slipped against the euro and yen, with investors bracing for a so-called hawkish rate cut by the Fed. The pound rose 0.10% versus the dollar at $1.3313. It hit $1.3385 last week, its highest since October 21.

The currency has added around 1% since finance minister Rachel Reeves delivered the budget on November 26.

"Sterling enjoyed a relief post budget," said Francesca Fornasari, head of currency at Insight Investment, arguing that "a huge amount of bad news was already priced into markets" before November 26.

"Looking forward, we're likely to need some positive news on growth for Sterling to outperform its European peers," she added.

Some analysts also mentioned mildly positive revisions to the PMIs last week, suggesting that Britain's economy was not slowing to the extent that market participants had feared.

Some firms said uncertainty about finance minister Rachel Reeves' November 26 budget had prompted them to delay investment in new projects.

Analysts' views on the UK growth outlook remained mixed.

"Prospects for weaker UK growth suggest scope for the Bank of England to surprise with more interest rate cuts than markets currently discount," said Mark Dowding, BlueBay chief investment officer at RBC BlueBay Asset Management.

Gross domestic product figures are due on Friday.

Investors await the Bank of England decision on rates next week, with policymakers striking differing tones over the outlook for monetary policy on Tuesday, suggesting that a split on the Monetary Policy Committee persists.

Traders price in 50 bps of BoE rate cuts by next summer and an around 90% chance of a rate cut next week. The euro was up 0.02% versus the British currency at 87.43 pence . It hit 87.21 pence on Tuesday, its lowest since October 24. Money markets recently scaled back bets on possible European Central Bank rate cuts, supporting the euro.

(Reporting by Stefano Rebaudo; Editing by Aidan Lewis)