(Updates prices, adds comments)
* Pound rises versus euro on Greek bailout uncertainty
* Sterling slides versus dollar as risk sentiment declines
* UK PMIs underpin sterling but more QE expected this week
By Nia Williams
LONDON, Feb 6 (Reuters) - Sterling rose against the euro but slipped against the dollar on Monday as Greek politicians struggled to find a consensus on bailout terms, heightening anxiety over the debt crisis in Europe and lending support to the U.S. currency.
A recent run of positive UK economic data gave some support to sterling, though dealers said it was unlikely to dissuade the Bank of England from announcing an increase on Thursday in the asset purchase programme that has been weighing on the pound. In the meantime, events in the euro zone continue to drive currency movements.
The Greek government and party leaders are yet to agree on what conditions they are prepared to accept in exchange for a second bailout. They must do so before euro zone finance ministers next meet, a government official said, countering reports that a deadline had been set for today.
Failure to secure a second bailout would result in an unruly default by Greece on its sovereign debt.
The euro was down around 0.4 percent on the day at 82.80 pence. Traders said support was at this year’s low of 82.22 hit in January and a break through there would take the pound to its strongest since September 2010.
“A lot of people are waiting for something out of Greece, I feel the markets have been remarkably resilient even though there have been these Greek talks going on,” said Kathleen Brooks, research director at Forex.com.
Brooks said euro/sterling had been trading in a tight range roughly between 84 pence and 82.20 pence since the start of the year and the Greek talks could potentially trigger a break in either direction.
“If we get a satisfactory conclusion the euro could move higher, if we were to go above 84.25 that could potentially target a move all the way back up to 86. Similarly that cross is in deep trouble the moment it goes below 82.20,” she said.
Sterling was down around 0.2 percent versus the dollar at $1.5783, below a 10-week high of $1.5884 hit last week. Traders reported stop-loss sell orders around $1.5715, while bids were also highlighted around $1.5710/00.
The pound has benefited against the dollar since the middle of January from a rally in equities which has boosted riskier currencies, together with data showing the UK economy may be turning the corner.
Technical analysts said the 200-day moving average at $1.5965 would need to be broken for fresh upside potential, while offers were reported around $1.5880/90.
A strong run of closely watched Purchasing Managers’ Index (PMI) data last week suggested Britain could dodge recession early this year. But the Bank of England is expected to remain cautious and adopt another round of quantitative easing when it meets this week, with forecasts from economists polled by Reuters centred on 50 billion pounds more being pumped into the economy.
“Some of the recent data might elicit a bit more caution from members of the MPC but there is still a persuasive case for additional action,” said Michael Derks, chief strategist at FxPro, who thought more QE was priced into sterling but said a lower amount than 50 billion would give the pound a knee-jerk boost.
Austerity measures from the British coalition government have placed the emphasis on the BoE to support economic growth, with markets expecting interest rates to remain at record lows of 0.5 percent for the foreseeable future.
Should the BoE surprise by announcing a larger-than-expected QE total this week, sterling is likely to come under pressure. Speculative data shows short positions are still in the ascendancy in the UK currency.
Some market players said they saw sterling holding firm against the dollar irrespective of easy monetary policy from the BoE. Pierre Lequeux, head of currency management at Aviva, said he had a long sterling/dollar position and expected appetite for perceived riskier currencies to pick up on improved U.S. economic data and easing euro zone funding pressures.
“My view is if we get through Q1 with all the issues of funding in Europe we will be okay for the next six months or so. The continued rebound in the equity market will contribute to an overall weaker dollar,” Lequeux said. (Additional reporting by Neal Armstrong; Editing by John Stonestreet)