Stg up, continues to consolidate from recent lows

* Sterling firms vs dlr, euro but UK economy still a worry

* Pound at $1.7655 GBP=, euro at 80.15 pence EURGBP=

* NIESR says GDP fell 0.2 pct in 3 months to August

* UK July trade gap narrows, but still wider than forecast

LONDON, Sept 10 (Reuters) - Sterling firmed against the dollar and euro on Wednesday, continuing to stabilise after hefty losses lately but gains were limited after a leading UK think tank said the economy is contracting.

The latest UK trade figures showed July's deficit narrowing slightly but still larger than economists had forecast. The oil deficit hit a new record and June's gap was revised wider, but this had little immediate impact on sterling.

At 0835 GMT the pound was trading up 0.2 percent against the dollar GBP= at $1.7655, rebounding further from its lowest level since April 2006 on Monday at $1.7469.

The euro was down 0.1 percent at 80.13 pence EURGBP=, of last week's record high of 81.86 pence. On Tuesday, the euro had slipped to a two-week low of 80.01 pence.