Sterling hits 1-mth low vs dlr, euro after weak UK data

* Sterling hits 1-mth low vs dlr, euro; smarts after UK data * Traders brush off solid UK confidence, house price data * Traders await BoE policy decision

LONDON, July 8 (Reuters) - Sterling extended losses on Wednesday, hitting a one-month low against the dollar and the euro after weak UK manufacturing output data the previous day further clouded optimism that the economy may be improving.

Brushing off figures on Wednesday showing a rise in British consumer confidence, the UK currency continued to smart from Tuesday's unexpected fall in output, and was on track to post its fifth straight day of losses.

Data on Wednesday also showed a slight fall in UK house prices in June, but they had limited impact on the market as their reversal from a jump the previous month was muted. Traders largely brushed off UK government proposals for banking sector reforms, as they were largely known to the market already.

"There was some consumer confidence data earlier today which was stronger, but the main issue is the manufacturing figures from yesterday, which is keeping sterling weak," said Adarsh Sinha, currency strategist at Barclays Capital in London.

Traders awaited a policy decision by the Bank of England on Thursday, when it ends a two-day meeting.

The central bank is widely seen holding interest rates at a record low 0.5 percent on Thursday, but market participants said sterling may come under more selling pressure if it increases its asset purchase programme.

Sterling GBP=D4 fell as low as $1.6046, its weakest since June 9, before pulling back slightly to $1.6100 by 1328 GMT, down 0.2 percent on the day.