Sterling at 5-1/2 mth low vs euro after mixed data

* Pound hurt by divergent rate outlooks for euro zone, UK

* Little market reaction to mixed UK unemployment data

By Brenda Goh

LONDON, April 13 (Reuters) - Sterling fell to a five-and-a-half month low against the euro on Wednesday as investors bet BoE interest rates would lag those in the euro zone, with a mixed UK jobs report offering little support.

Strategists said the common currency was now on track to test its October 2010 high of 89.4150 pence. If it breaks this level, it could be poised for a rise to its March 2010 high of 91.50 pence. It was last up 0.1 percent at 89.14 pence EURGBP=D4, having risen as high as 89.24 pence.

"If we break the 89.25 level we're going to be heading into the 89.45 to 89.50 region," said Jane Foley, currency strategist at Rabobank.

Expectations for a near-term Bank of England rate hike have already been slashed significantly following a surprise fall in UK inflation on Tuesday and dismal retail sales data.

Wednesday's UK jobs data showed the number of people out of work on the broad ILO measure fell by 17,000 in the three months to February. That reduced the jobless rate to 7.8 percent, below forecasts for a reading of 8.0 percent.

But any optimism was offset by a small rise of 700 in the more timely claimant count measure of unemployment for March, with wage growth also subdued.

"With inflation running at 4 percent, whichever way you look at it, pay is failing to keep pace with the cost of living so it is unsurprising to see retailers struggling," said James Knightley, economist at ING.

"This increasingly suggests May will see rates left at 0.5 percent."

Sterling was last flat on the day against the dollar at $1.6256 GBP=D4, with stops cited at $1.6235 and below. It has failed to hold its ground above $1.63, weighed down by its losses against the buoyant euro.

The pound has suffered recently against the euro as investors increasingly see the BoE as a laggard in tightening monetary policy behind the European Central Bank, which hiked rates by 25 basis points last Thursday.

While rate hike chances in the UK have been pushed back to October from August, investors are factoring in a 60 percent chance of another ECB rise in August. BOEWATCHECBWATCH

(Editing by John Stonestreet)