(Updates with reaction to BOE QE announcement)
* Sterling rises vs dollar and euro after QE
* BOE action douses talk of more aggressive easing
* Better risk appetite could drive sterling higher
By Anirban Nag
LONDON, Feb 9 (Reuters) - Sterling climbed against the dollar and the euro on Thursday after the Bank of England said it will inject 50 billion pounds more into the UK economy, which was in line with expectations and quashed market talk of a more aggressive stimulus.
The BOE left its key interest rate at a record low of 0.5 percent, and said it would buy another 50 billion of assets - mostly government bonds - with freshly printed money. Some had positioned for a 75 billion injection, forcing them to reverse those bearish positions, traders said.
"It is a bit of relief," said Richard Wiltshire, chief fx trader at ETX Capital. "Sterling has been in a period on ongoing resilience and with the suggestion that inflation will achieve the goal of below 2 percent without further stimulus, things are again looking positive for it."
In its accompanying statement, the BOE sounded a bit more upbeat saying recent surveys painted a more positive picture of the UK. It was also expecting inflation to undershoot 2 percent in the medium term without more monetary support. .
Sterling rose to a session high of $1.5880, from $1.5830 before the BOE announcement. The currency had risen to $1.5929, its strongest since mid-November, on Wednesday. Near-term resistance is seen at its 200-day moving average of $1.5937 with traders citing offers at $1.5900 and bids lurking at $1.5760-80.
Earlier, the pound got a boost after UK industrial data beat forecasts and the trade deficit narrowed more than expected. But that rally proved fleeting.
The euro fell 0.4 percent against sterling to 83.52 pence, having risen to 84.02 pence earlier in the day - its highest in more than a week and hovering above its 55-day moving average of 83.84.
The European Central Bank also kept base rates unchanged at 1 percent but there are chances it could flag more cuts in the near term. Investors are also hoping that Greece will strike a deal to avert a default soon.
Analysts said even though there was evidence that the UK growth picture was improving, headwinds remain and that could temper the currency's gains.
Recent purchasing managers' surveys indicated business activity was improving, but a survey on Tuesday showed retailers suffered their second worst January since records began in 1995.
So chances of more QE will depend on whether growth will pick up on one hand and downside risks to inflation risks on the other.
"On balance I would argue that the MPC taking a cautious approach to QE and the future trajectory of BOE asset purchases remains far from certain," said Kathleen Brooks, research director at FOREX.com.
"In the very near term, if sterling/dollar can break above $1.5900 then tough resistance lies at $1.5940, but the road to $1.60 actually depends less on QE and more on the overall risk environment."
Overall risk appetite was holding up well on expectations that central banks around the world will keep monetary policy easy to support growth. There were also expectations that Greece can avoid default and prevent contagion that could ensnare larger euro zone economies like Spain and Portugal.
"So a lot of what will happen to sterling will depend on how euro/dollar reacts. If euro rises to above $1.35, then sterling will rise too," said Peter Allwright, head FX trader at fund manager RWC Partners. (Editing by Ruth Pitchford)