Aug 5 (Reuters) - Sterling slipped against the euro on Friday, tracking the single currency's rise against the dollar, but supported by concerns that the euro zone's debt problems are set to engulf two of its larger economies. The pound was little changed versus the dollar as the deepening debt crisis drove a panicked sell-off in many global markets. It hovered near a two-month high against the euro, and analysts saw room for sterling to climb. Traders said demand for the euro versus the dollar from European central banks had pushed the single currency higher across the board but were not convinced it could maintain those gains. "If we continue to get this risk-off environment, euro/sterling could continue to go lower on euro-specific risks," said Adam Cole, global head of currency strategy at RBC Markets. The euro rose around 0.3 percent to a session high of 87.08 pence, recovering from an earlier slide to 86.55 pence. That level, which was also hit on Thursday, was the euro's weakest since late May. Technical analysts said a sustained break below support at 86.65, the 200-day moving average, would open up the potential for a fall to 85.90 pence. Cole said he expected the euro to fall to around 85 pence by the end of September. Sterling was flat on the day at $1.6270. Sterling found its footing after falling 1.0 percent the previous day, when the U.S. currency rallied broadly on the back of intervention by Japanese authorities to sell the yen versus the greenback. The pound showed little reaction to data showing a rise in UK house prices in July, as the figures from mortgage lender Halifax indicated that the housing market was unlikely to improve further through the end of the year. CABLE RISKS SEEN With euro sentiment deteriorating rapidly, many in the market expected the euro to fall further across the board, which could in turn take the pound lower versus the dollar. "GBP/USD is likely to suffer if the euro weakens significantly from here," strategists at Lloyds TSB said in a note. Some analysts added that the pound had room to lose against the dollar if worries about a full-blown global economic downturn prompts investors to plough funds back into the world's most liquid currency. "The UK doesn't have the safe-haven status of the dollar," Cole at RBC argued. "And despite the U.S.-centric nature of some of the problems the world is digesting, I still think the dollar's safe-haven status is unshaken. So Cable could go lower in a outright risk-off environment." Given growing concerns about the global outlook, investors braced for a reading of U.S. jobs due later in the day. Forecasts are for U.S. non-farm payrolls to have risen 115,000 in July. Traders said they were pricing in the possibility of a weaker-than-expected reading, but some analysts said they could not rule out the chance of a negative reading, which could add to the selling in risky assets and may put some selling pressure on sterling versus the dollar. (Reporting by Naomi Tajitsu; editing by Patrick Graham)

Source