* Euro rises vs sterling on Greece relief
* Caution ahead of Wednesday's BoE minutes
By Tricia Wright
LONDON, June 18 (Reuters) - Sterling fell against the euro on Monday after a pro-bailout party won Greece's election, providing some relief to the common currency, with the pound vulnerable to further losses on expectations of more monetary stimulus by the Bank of England.
The euro rose 0.3 percent against the pound to 80.65 pence after Sunday's vote, which saw the conservative New Democracy party secure a narrow victory. It will now seek to form a coalition with other parties which back the bailout programme that is keeping Greece afloat.
The euro's gains against the dollar fizzled out as Spanish 10-year bond yields rose past the key 7 percent mark, keeping alive fears that contagion will ensnare larger euro zone economies. Despite the euro's retreat against the dollar, it held its gains against sterling.
Euro/sterling has been stuck in a range between around 81.50 pence and a 3-1/2 year low of 79.50 pence since the start of May, and market players said a break out to the upside could see it target 82.05 pence - trend line resistance from the November highs at 88.30 pence.
"The Greek election outcome has resulted in some significant short covering in the single currency and as a result sterling has underperformed - as you'd expect. So it's really just a positioning adjustment," said Michael Derks, currency strategist at FXPro.
"At the same time, evident at the second half of last week, the Bank of England is at least considering the necessity for further quantitative easing and that's probably not helping the currency either, at least in a background sense."
Traders said the possibility of more quantitative easing was weighing on the pound, with minutes due on Wednesday from the latest BoE meeting expected to give clues whether policymakers are leaning towards further stimulus to bolster UK growth.
The BoE last week announced an emergency liquidity package to support the banking system and Governor Mervyn King suggested more easing could be on its way.
More QE is usually considered bearish for the currency as it increases the supply of pounds in the system.
The pound slipped against the dollar, down 0.3 percent at $1.5660, retreating from a two-week high hit on Friday. Offers were cited at around $1.5730.
Traders anticipated a recovery in sterling if the U.S. Federal Reserve signals more easy money in its policy statement on Wednesday following recent lacklustre economic data.
