* Pound down 0.3 pct vs dollar after Friday's 5-wk high
* Markets await further signals on ECB rescue plan
* Investors eye Bank of England meeting on Thursday
* Weak data highlights pound'S vulnerability
(Updates with economic data, comments)
By Michael Szabo
LONDON, July 30 Sterling eased against the
dollar on Monday, in line with a broadly weaker euro as
investors anticipated European Central Bank measures to prop up
the faltering euro zone and also looked to Thursday's Bank of
The pound slipped by 0.3 percent against the dollar
to $1.5696, retreating from a five-week high of $1.5768 hit on
Friday, which marked the end of a two-day, 1.6 percent rise.
"Sterling has been looking resilient over the past couple
weeks. We saw big moves on Friday but we're seeing a general
softening in the risk tone today," Jennifer Hau, FX Strategist
at Lloyds TSB.
"The market will look for further headlines to continue the
momentum we've seen, but unless we get a continuation of the
comments from the end of last week, euro/dollar will probably
dip lower and cable (dollar/sterling) will probably follow."
Against the euro, though, sterling was higher.
The common currency was 0.3 percent lower at 78.15 pence, as
Europe's single currency faltered ahead of possible ECB action
at its meeting on Thursday.
Last Thursday, ECB President Mario Draghi pledged to do
whatever it took to save the euro, while late on Friday Standard
& Poor's affirmed the UK's AAA credit rating with a stable
outlook, quelling worries after lower-than-expected second
quarter GDP data.
Analysts polled last week said Britain had about a one in
three chance of losing its AAA sovereign rating.
RESILIENCE UNDER THREAT
The market has been focused primarily on events in the euro
zone and the United States, where investors are looking for
signs from policymakers of further quantitative easing.
This has led to resilience in the pound despite weak UK
economic data, but analysts said sterling could be vulnerable if
a steady stream of poor numbers pushed the Bank of England
closer to more quantitative easing or even a 25 basis point rate
Strategists expect the BoE's Monetary Policy Committee (MPC)
to leave both policy stances unaltered when it meets on
Thursday, though the picture will likely change as the year
"The MPC will ease further, and so will the ECB. But at the
risk of sounding overly simplistic, ECB rates are close to zero
and have less room to fall," said Societe Generale currency
strategist, Kit Juckes.
"Even though we think we will see euro/sterling fall to 75
pence over the next year, we can easily imagine it trading well
above 80 pence in the next month or so."
The BoE published data on Monday showing British mortgage
approvals and lending slumped in June, echoing broader economic
weakness last month blamed in part on due to extra public
holidays and very wet weather.
Consumer lending, such as credit card borrowing, held up
relatively well, but house purchase activity fell to its lowest
in one and a half years and headline money supply figures showed
their biggest annual drop since records began in 1983.
British retail sales also rose less than expected in July,
Confederation of British Industry data showed.
"These data will nonetheless add to the sense that the
credit environment in the UK has been deteriorating, justifying
the additional policy measures on liquidity and bank funding
that the Government and the Bank of England has embarked on,"
said RBC Capital Markets' Jens Larsen in a note to clients.
(Editing by John Stonestreet)