Sterling falls to 7-week low vs broadly firm euro

* Sterling falls to 7-week low of 84.88 pence vs firmer euro

* Pound driven by euro movements; BoE mins awaited on Wed

* BoE's Sentance hawkish, but UK housing survey weak

LONDON, July 19 (Reuters) - Sterling fell to a seven-week low against the euro on Monday, dented by broad gains in the single currency ahead of the results of stress tests on European banks later this week.

Traders said sterling was driven by movements in the euro, particularly as key UK news was not due until later in the week, with Bank of England minutes on Wednesday and second-quarter gross domestic product data on Friday. ECONGB

Improved optimism towards the euro has prompted investors to reduce previous short positions on the single currency, including against the pound, while they shrugged off hawkish comments from a UK policymaker.

"Sterling is being caught in the maelstrom of what's going on with the euro. Euro/sterling is bid on the back of what's going on in euro/dollar, which is forcing cable lower," said Gavin Friend, currency strategist at nabCapital.

"The size of the short euro positions being squeezed is pushing the euro up against everything."

Potentially sterling-positive M&A news also failed to buoy sterling, with France's GDF Suez (GSZ.PA) reviving tie-up talks which could see it take a majority stake in Britain's International Power (IPR.L). [ID:nLDE66I07L]

At 1149 GMT, the euro EURGBP=D4 was 0.3 percent higher at 84.74 pence, having hit a high of 84.88 pence, its strongest since May 31.

"The unexpected break above the 84.00 level (in euro/sterling) throws into doubt our lower euro scenario and now targets the 85.20 level. The 0.8400/10 area should now act as significant support for this move higher," said Michael Hewson at CMC Markets.

He added, however, that any move below 84.00/10 could put the 83.20/30 level back into focus.

Sterling was steady against the dollar GBP=D4 at $1.5284, off an earlier high of $1.5351.

BoE MINUTES AHEAD

Weekend comments by Bank of England rate-setter Andrew Sentance reiterating his view that the central bank should start to gradually raise rates [ID:nLDE66G051] lifted sterling in early trade, but analysts said many investors were sidelined before Wednesday's BoE minutes.

"For sterling to see a leg higher we would need to see at least one other person join Sentance in voting for a hike before the market contemplates rates rising sooner rather than later," said RBC currency strategist Adam Cole.

Sentance was alone in June in voting for a 25 basis point hike in interest rates to take them above their current record low 0.5 percent.

Sentance's comments were also partly offset by a downbeat house price survey from Rightmove, which said asking prices for British homes fell by 0.6 percent month-on-month in July, the first fall this year. [ID:nLDE66F0XD]

Tuesday will see the release of public finances data for June, with second-quarter gross domestic product figures due on Friday.

(Reporting by Jessica Mortimer; Editing by Susan Fenton)