Sterling slips as UK PMI brushed off; BoE in focus

* Sterling falls, traders brace for BoE policy meeting * Pound briefly jumps after strong UK PMI, then pulls back * Factory PMI jumps to 2-year high in October

LONDON, Nov 2 (Reuters) - Sterling slipped on Monday, snapping a five-day winning streak against the euro as traders braced for the possibility the Bank of England may announce an increase in its asset-buying programme later in the week.

A surprising jump in UK manufacturing data ultimately did little to help sterling, which was also hit as traders awaited a British government announcement of a banking sector overhaul.

Sterling's short-covering rally has stalled, pulling the UK currency back from its highest levels versus the dollar and the euro in more than a month hit in late October, and analysts said traders were unwilling to take on big bets before the BoE policy announcement on Thursday.

"With the possibility of more quantitative easing looming, no one is willing to bet the ranch on this one," said Daragh Maher, senior currency strategist at Calyon in London. Calyon expects the BoE will stay pat on QE this month.

A Reuters poll showed most analysts expect the BoE will increase its 175 billion pound asset-purchasing plan by 25 billion pounds to stimulate further the struggling UK economy. [BOE/INT]. Some in the market see a rise of as much as 50 billion pounds.

By 1518 GMT, sterling GBP=D4 traded 0.3 percent lower on the day at $1.6390. It clawed back from the day's low of $1.6328 after strong U.S. data on the manufacturing, construction and the housing sectors stoked some demand for risk and pushed the dollar down broadly.

The pound had received an initial boost in early London trade, jumping half a cent after the CIPS/Markit purchasing managers index of manufacturing activity rose to 53.7 in October from September's 49.9. [ID:nL2579102]