Sterling slips after limited UK GDP upgrade

* Sterling on track for best weekly gains since mid-June

* Asian central bank seen early buyer of cable

* Euro pares losses vs sterling after UK data

LONDON, Aug 24 (Reuters) - Sterling dropped to a two-week low against the euro and eased against the dollar on Friday after an upward revision of UK gross domestic product was in line with expectations, wrongfooting some who had expected an even shallower recession.

Traders said strong bids from Asian central banks were likely to limit losses in the near term.

Data on Friday showed the UK economy contracted 0.5 percent in the second quarter, slightly better than the first reading of a 0.7 percent contraction.

But this was largely priced in by investors and analysts said the overall report was far from encouraging, especially since it pointed to weakening exports, a fall in investments and sluggish consumer spending.

All of which is likely to weigh on the UK economy and keep alive the risk of further quantitative easing by the Bank of England. More QE is considered bad for the currency as it increases the supply of pounds.

The euro rose to a two-week high of 79.28 pence after the data was released, from around 79.15 pence beforehand with option barriers cited at 79.50 pence by traders.

Sterling fell to a session low of $1.5821 after the data was released, before recovering to $1.5845, slightly lower on the day. It had struck a three-month high of $1.5912 on Thursday.

"The breakdown of the GDP report isn't encouraging at all," said Jane Foley, senior currency strategist at Rabobank.

"There is a structural worsening of the UK economy. But we are also expecting the Fed to act in the near term and that should weigh on the dollar and support cable in the near term."

Despite the latest dip, the pound is on track for its best weekly gains since mid-June after the minutes from the Fed's last meeting raised expectations policymakers could deliver another round of quantitative easing in the near term.

In contrast to the Fed, the Bank of England is largely expected to keep monetary policy largely unchanged at least until towards the year-end.

"Sterling/dollar looks a buy today in the $1.5830/50 area and could make it close to $1.60," said Chris Turner, head of FX strategy at ING. He said the Fed's minutes had set the tone for a softer dollar in the coming two to three weeks.

Chartists said resistance lay around $1.5910, the 61.8 retracement of the late April to early June fall from above $1.63 to around $1.5270. A clear break of that level could see sterling rise to test $1.60, they said.