* Sterling up vs euro before EU summit * Greek talks weigh on single currency * Pound falls vs dollar, tracking moves in euro/dollar * QE prospect may weigh on sterling; PMI data in focus By Clare Kane LONDON, Jan 30 (Reuters) - Sterling strengthened against a broadly weaker euro on Monday, ahead of a testing day for the euro zone with a summit in Brussels as talks continue between Greece and private creditors on a debt swap deal. European Union leaders are expected to sign a deal introducing a permanent bailout fund for the euro zone and a balanced budget rule in national legislation. The talks may be overshadowed by negotiations on a debt swap deal in Greece, which are expected to draw to a conclusion this week. Greece must reach a deal with its creditors to receive its next bailout tranche. The euro was down 0.2 percent on the day at 83.88 pence, off a four-week high hit on Friday of 84.09 pence. Resistance was at 84.22 pence, the late December high. "When you've got the leaders' meeting today where Greece is going to potentially still overarch any discussions on the ESM or the fiscal compact, it's not surprising that obviously the euro looks a little softer this morning," said Jeremy Stretch, head of currency strategy at CIBC. Italy will also be in the spotlight on Monday, with an important debt auction where yields are expected to come down to six percent, a sign that investors have faith in the country's new technocrat government. Sterling fell against the dollar on Monday, tracking falls in the euro versus the dollar, after a run of gains that have taken it above $1.57 from below $1.54 in mid-January. Traders and analysts saw levels above $1.57 as a good opportunity to take profit on those gains. The pound was last down 0.4 percent against the dollar at $1.5667, after reaching a high of $1.5740 against the currency on Friday, its strongest since Dec. 21. Stretch expected the pound would head towards $1.5650/40, before easing further towards $1.55 later in the week. The dollar strengthened against a number of currencies after weakening last week on news that the Federal Reserve would keep interest rates at record lows until at least 2014 and slightly-weaker-than-expected GDP data. QE PROSPECT WEIGHS ON POUND Sterling may come under pressure when PMI data for January on manufacturing, construction and services sectors is released later this week, which is likely to add to the picture of a weakening economy. Most market players expect the Bank of England will increase asset purchases under its quantitative easing programme in February. This is likely to weigh on sterling, although comments by BoE policymaker David Miles on Friday dampened the prospect. Miles told Reuters in an interview that "it is presumptuous to assume [further quantitative easing] is a done deal", lending temporary strength to the pound. "Even though euro/sterling remains close to key resistance around 84.00 pence, we suspect this will prove hard to break until there is more clarity on the next Greek package given the doubt surrounding the UK QE decision," analysts at Lloyds said in a note to clients. If the PMI data comes in above expectations it could reduce expectations of another round of quantitative easing from the central bank, which may strengthen the pound. A Reuters poll showed a consensus estimate of an improvement in manufacturing PMI, but falls in construction and services PMI. (Additional reporting by Jessica Mortimer; Editing by Stephen Nisbet)

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