* Euro/sterling holding around near 10-month low * Developments in Europe seen as chief sterling driver * UK retails sales data due 0930 GMT By Nia Williams LONDON, Dec 15 (Reuters) - Sterling steadied against the euro on Thursday after hitting a near 10-month high the previous session, but was likely to benefit from any further negative news on the euro zone's efforts to tackle its debt crisis. The euro was flat against the pound at 83.94 pence, recouping some losses from Wednesday when it sank to 83.72 pence, its lowest level since mid-February. Traders said there was interest to sell into any rally but the single currency was likely to find strong support from corporate demand around 83.33 pence, equivalent to the 1.20 euro level in sterling/euro. Sterling has been largely driven by negative sentiment towards the euro rather than UK fundamentals in recent sessions, meaning it has struggled against the safe-haven U.S. dollar. The pound was up 0.2 percent on the day versus the dollar at $1.5490, having dropped to a two-month low of $1.5408 the previous session. UK retail sales data for November, due at 0930 GMT, is forecast to be weaker than in October, although analysts said the impact on the pound could be limited. "This morning we have got UK retail sales figures which are expected to be weak. That could see some downward pressure but primarily we think news from Europe is going to be the main driver for cable," said Jennifer Hau, FX strategist at Lloyds. "For euro/sterling it depends what happens in euro/dollar but I think we will hold around these levels. We would have to see some clear negative news from Europe today to fall much lower." Analysts said sterling's recent gains mostly reflected euro zone debt worries after a European Union summit last week offered no hope of an immediate resolution of the debt crisis. Some market players have predicted more gains for sterling versus the euro in coming weeks as investors opt for the relative safety of UK government bonds over euro zone assets. But Jane Foley, senior currency strategist at Rabobank, said investors were likely to be unsettled by poor UK fundamentals, meaning the outlook for sterling was not particularly positive. Signs of dissent among members of the ruling coalition government after Conservative Prime Minister David Cameron vetoed proposed EU treaty changes last week, to the dismay of many of his Liberal Democrat partners, could also weigh on the pound. "I would say since last week the outlook for sterling has probably deteriorated. We have always been able to say while UK fundamentals are weak we have an austerity plan and a single coherent government, but that is less clear now," Foley said. (Editing by Susan Fenton)

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