Sterling falls, investors seek BoE rate view clarity

* Sterling falls vs dollar, traders cite Europe bank selling

* Clarity on BoE rate view sought after c.bank holds rates

* Market ignores strong UK PPI data

By Naomi Tajitsu

LONDON, Feb 11 (Reuters) - Sterling slipped versus a broadly strong dollar on Friday, after buying driven by speculation of a UK interest rate rise stalled in the absence of clarity on the central bank's rate stance.

Traders said selling by a European bank helped to push the pound to its weakest against the dollar since late January, while investors brushed off data showing a jump in wholesale inflation which added to the case for UK interest rates to rise.

The Bank of England kept interest rates on hold at 0.5 percent on Thursday. While the decision was widely expected, it disappointed some investors who had bet on a small possibility of a rate rise. [ID:nLDE7191B4]

As the BoE will not release details of Thursday's policy debate and voting until later this month, analysts said the market continues to lack clarity on how close the bank really is to a rise in rates, as inflation pressures mount.

This ongoing uncertainty helped to put the pound on the back foot on Friday, said John Hydeskov, currency strategist at Danske Bank, adding that the market was also keenly awaiting the BoE's inflation report next week to gauge its outlook on prices.

"We're not clearer on the central bank's stance than we were before the decision. We still don't know whether the MPC has more hawks," he said.

Sterling is poised to end the week slightly lower against the dollar and the euro as its rally in the past month has petered out. It has gained since the start of the year due to investors bringing forward their bets on when the BoE would make its first move.

Markets now fully price in a 25 basis point rate rise by mid-year BOEWATCH.

Sterling GBP=D4 fell 0.8 percent on the day to $1.5963. Technical analysts said its break below $1.60 opened the door to a fall to around $1.5920, the 38.2 percent retracement of its December-February rally.

EGYPT RISK

Traders said the pound also struggled due to safe-haven demand for the dollar after Egyptian President Hosni Mubarak's refusal to step down increased political uncertainty in North Africa and the Middle East. [ID:nLDE7192NZ]

Safe-haven flows boosted the dollar, which rose 0.5 percent against a currency basket .DXY

"Sterling was bought up yesterday on the belief that Mubarak was going to step down ... He didn't so the move reversed," said a trader in London.

Still, he said the pound would recover, revisiting a three-month high around $1.6280 hit earlier this month, as investors anticipate a rate rise in the next few months.

The euro EURGBP=D4 edged up 0.2 percent to a session high of 84.67 pence. Traders said the single currency was boosted by demand from a French corporate name.

The pound failed to capitalise on data showing UK producer input prices rose 13.4 percent on the year in January, above forecasts for 12.6 percent, as some in the market argued the BoE was relaxed about medium-term price risks, focussing more on longer term implications. [ID:nLDE71A0QF]

Still, the data highlighted the ongoing pick-up in inflation.

"January's producer prices figures provide a timely reminder that, despite yesterday's decision to keep rates on hold, the risk of a near-term hike in interest rates remains very much alive," said Samuel Tombs, economist at Capital Economics.

While he said that temporary inflation pressures will have subsided by the time current input prices feed through to consumer prices, he added: "Today's figures may add to concerns about the likely persistence of inflationary pressures." (Editing by Patrick Graham)