Sterling slides, traders brace for BoE decision

* Sterling slides, traders speculate about rise in QE * Pound retreats from 1-week high vs dollar, euro * Traders: BoE likely to up QE by 25 bln pounds, signal end

By Naomi Tajitsu

LONDON, Nov 5 (Reuters) - Sterling fell on Thursday as traders waited to see whether the Bank of England will announce an increase in its quantitative easing programme when it ends a policy meeting later in the day.

The BoE will issue its policy statement at 1200 GMT. It is widely seen holding interest rates at a record low 0.5 percent, and market participants expect it to extend a 175 billion pound plan to buy UK assets to increase market liquidity and boost lending to support the economy.

Traders speculated whether the BoE would extend quantitative easing by 25 billion pounds or even 50 billion pounds. Both scenarios would likely result in a sell-off in sterling, at least initially, they said. "The market will be square (on its sterling positions), maybe slightly short going into the meeting," said a trader based in London.

He added that the market's main scenario was for the BoE to announce a 25 billion increase in QE while signalling that the instalment would be the last of the asset-buying programme.

Two-thirds of economists polled by Reuters expect the BoE to top up its QE programme by at least 25 billion pounds on Thursday after the economy unexpectedly contracted between July and September. [BOE/INT]

Sterling has suffered all year, dropping nearly 13 percent against the dollar, as the BoE has pumped a staggering amount of funds into the UK market to resuscitate the economy, while other central banks are seen to have ended stimulus measures and some have even started to raise rates.