Sterling lifted by strong UK retail sales

* Sterling up 0.2 pct at $1.5517 GBP=D4

* UK CBI retail sales rise sharply

* Resistance near 200-day moving average of $1.5554

LONDON, July 27 (Reuters) - Sterling extended gains to hit a five-month high against the dollar on Tuesday lifted by robust UK retail sales data and general risk-taking sentiment from better-than-expected bank earnings results.

A survey by the Confederation of British Industry showed monthly retail sales in July rose at their fastest pace in three years, beating analysts' forecasts although helped by a reweighting of the survey. [ID:nAHLQIE64M]

"Following on from last week's news that GDP growth had surprised sharply on the upside in the second quarter, (there was) some more very good news on the UK economy," said Howard Archer, chief European and UK economist at IHS Global Insight.

"Nevertheless, the suspicion remains that further out consumers are likely to find life hard and will be constrained in their spending" given the government's looming fiscal squeeze, he added.

Sterling rose as far as $1.5535, its highest since late February, as stop-losses were triggered near $1.5530. By 1017 GMT, it was back at $1.5517, up 0.2 percent on the day GBP=D4.

Gains were hampered ahead of option barriers near $1.5550, and the 200-day moving average at $1.5554, traders said.

Support was at the base of a two-month up-channel at $1.5213, and an upside bias would remain while this held, technical analysts at Commerzbank said.

The pound got a boost in early European trade after better-than-expected bank results. UBS (UBSN.VX) outdid rivals and beat profit forecasts thanks to strong investment banking revenues and shrinking client outflows, while Deutsche Bank (DBKGn.DE) held ground after a drop in loan loss provisions. [ID:nLDE66Q0FS]

Even a loss at British oil major BP (BP.L), which took a hefty charge related to the Gulf of Mexico spill, was brushed aside as the worst for the company was seen as over. [ID:nWLA9308]

UK shares were up 0.8 percent .FTSE by late morning trade.

"We saw a bit of a sell-off in the dollar as the bank results boosted risk appetite," said Christian Lawrence, currency strategist at RBC Capital Markets.

There was also talk of dollar-selling demand due to position adjustments ahead of the month-end by funds and model funds, which could keep pressure on the greenback.

The euro was little changed at 83.85 pence EURGBP=D4.

Trade-weighted sterling was at 81.3 =GBP, after hitting a three-week high of 81.7 on Monday.

A closely watched auction of Spain's 3- and 6-month bills saw healthy demand and the average yield falling from a month earlier for the first time since March. [ID:nLDE66Q0H2]

That alleviated euro zone sovereign debt and banking system concerns after the results of bank stress tests that came out late on Friday showing only a few banks failed the tests. (Reporting by Tamawa Desai)