RTRS: Sterling rises versus weaker euro; supported by UK data
* Euro dented on periphery concerns, down 0.3 pct vs pound
* Sterling helped by better UK trade data
* Gains vs euro limited; real money, models looking to sell (Recasts, adds quote, detail)
By Neal Armstrong
LONDON, March 9 (Reuters) - Sterling edged up against the euro on Wednesday as debt worries weighed on euro zone sentiment, while the pound gained support from better-than-expected UK trade data for January.
The pound slipped to a five-week low against the euro on Tuesday as expectations of relatively faster rises in euro zone interest rates kept the common currency supported.
But concerns about disagreements among euro zone leaders about how to solve a debt crisis in the region's periphery and higher yields at a Portuguese bond auction left the euro vulnerable on the day. [ID:nLDE7271HJ]
It was down 0.3 percent against the pound at 85.70 pence EURGBP=D4 after rising to a five-week high of 86.35 on Tuesday and remained shy of key resistance at the 2011 high of 86.72.
"Some folks out there are trying to pick the top in EUR/GBP but with real money yet to buy and model accounts feeling emboldened, the dips should be shallow," said a London-based spot trader.
European Central Bank Governor Jean-Claude Trichet last week hinted at a rise in interest rates in the euro zone as early as next month, while markets are not expecting the Bank of England to hike until June. BOEWATCH
The BOE's monetary policy committee starts its meeting on Wednesday. Economists expect rates to be kept at a record low of 0.5 percent on Thursday, although the debate within the nine-member MPC could be particularly lively as divisions grow on when the BoE should move.
"We expect an ECB hike in April and July but the market is pricing in another for October. We don't expect a third hike and that should then weigh on the euro," said Raghav Subbarao, currency strategist at Barclays Capital.
The pound was up slightly against the dollar GBP=D4 at $1.6195 pence, supported by demand from the Middle East, though its technical outlook was skewed towards the downside.
"The market has eroded its 20-day moving average at $1.6176 and attention has reverted to support, initially at $1.6030 and then $1.5970/60, which is key," said Commerzbank analysts in a note. The latter support level is the 38.2 percent retracement of the pound's rally from December to March.
Britain's global goods trade deficit narrowed in January to its smallest in nearly a year, bouncing back from its worst reading on record in December. [ID:nAHL8EE7E6]
