* Sterling trading not far from recent low of $1.5495
* Eases against euro, offers cited at 86.20 pence
* CBI industrial orders survey due
By Anirban Nag
LONDON, Nov 24 (Reuters) - Sterling traded close to a seven-week low against the dollar and was softer versus the euro on Thursday despite slightly better risk appetite, with investors looking to sell the pound on upticks given the gloomy outlook for the UK.
The second estimate of UK GDP confirmed the economy grew 0.5 percent in the third quarter. But underlying demand was weak, business investment fell sharply and exports also fell, all of which provided little cheer for sterling.
"The export contribution is weak and with the euro zone slowing, this definitely puts pressure on sterling in the medium term," said Sebastian Gely, currency strategist at Societe Generale.
Sterling was last flat on the day at $1.5518, having climbed to $1.5566 earlier in the session. It ran into a wall of offers around those levels and that dragged it lower to put it in sight of Wednesday's low of $1.5495. A drop below that will take it to its lowest in seven weeks.
On the upside, traders said decent offers at $1.5580 and $1.5600 were likely to check gains. Option expiries at $1.5605 are also likely to sway trade.
Against the euro, sterling was slightly lower with a bout of short covering and better than expected German business sentiment survey helping the common currency. Euro was up 0.2 percent at 86.12 pence with offers cited above 86.20 pence and stops lurking below 85.50 pence on the downside.
The euro had shed 0.5 percent against sterling on Wednesday after poor demand at a German debt sale stoked fresh fears that the peripheral debt problems were starting to hurt core euro zone countries.
"If German yields continue to rise we could see euro come under some pressure against sterling," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.
REALLOCATION
Analysts say rising German debt yields could increase demand for UK gilts --still considered a safe-haven-- and potentially supporting the pound.
On Wednesday, the spread between the German and UK 5-year CDS widened to nearly 10 basis points, the widest since early October. Stephen Gallo, head of market analytics at Schneider Foreign Exchange expects it to widen out further, eyeing the record level of 21 basis points set back in late September.
"We are seeing some reallocation by investors from AAA-rated euro zone assets to UK gilts," said SocGen's Gely. "That is definitely having an impact on sterling and should help it to outperform the euro."
Still, any upside for the pound would be limited given gloomy UK economic data and prospects of more quantitative easing by the Bank of England.
"I think investors are looking to play it looking for further weakness," JP Morgan's Chile-Freeman added. "The BOE is in a very dovish frame of mind and that is not surprising."
Bank of England minutes on Wednesday revealed a 9-0 vote to keep its quantitative easing target at 275 billion pounds, though some felt more QE might be warranted in the future.
BoE policymaker David Miles predicted "very low" growth for Britain over the next few quarters and said the central bank could do more quantitative easing if necessary.
Another policymaker Ben Broadbent chimed in, saying Britain's economy faced a roughly 50 percent chance of contracting in the fourth quarter of the year, and could even slip into recession.
Later in the day CBI industrial orders survey for November will be released and is likely to give a fresh indication how activity in sector is slowing in the last quarter of the year. (Editing by Anna Willard)
