Sterling bounces vs euro on strong UK retail data

LONDON, March 20 (Reuters) - Sterling rose by more than 1 percent versus a broadly weaker euro on Thursday after stronger than expected UK sales data cast doubt over how quickly and deeply the Bank of England will cut interest rates this year.

The Office of National Statistics said sales grew by 1 percent on the month in February, taking the annual rise to 5.5 percent, well above analysts' forecasts. Click on [nL20663332].

"It was clearly a strong number so it was positive for the pound and if we see further strength from the UK economy next week investors will price out any chance of a rate hike soon," said Peter Frank, currency strategist at Societe Generale.

By 1528 GMT, the euro was down 1.2 percent at 77.84 pence, its biggest one day fall versus the pound in nearly four years, retreating from an all-time high of 79.12 pence set on Monday EURGBP=.

However sterling lost ground to a rallying dollar, falling 0.2 percent to $1.98 GBP=. The U.S. currency firmed broadly against major rivals as tumbling commodity prices saw investors retreat to cash.

Minutes from the Bank of England's Monetary Policy Committee on Wednesday showed Deputy Governor John Gieve unexpectedly joined David Blanchflower in voting for a rate cut in March.

"The Bank of England is taking a relatively hawkish view at the moment but wage growth is under control and interest rates are going to come down quite hard in the second half of the year," said Russell Jones, head of fixed income and currencies global research at RBC Capital Markets.

The futures market is pricing in at least 50 basis points worth of cuts from 5.25 percent by the end of the year FSSZ8. (Editing by Mike Peacock)