* Sterling falls versus euro, edges up against weaker dollar * UK CPI data due at 0830 GMT * Weak number may increase chances of more BoE easing By Jessica Mortimer LONDON, Aug 14 (Reuters) - Sterling dipped against a firmer euro on Monday ahead of the release of UK inflation figures that may boost the case for more monetary stimulus from the Bank of England. Slowing inflation would allow room for the central bank to ease policy, probably resulting in more money being pumped into the economy via the bank's asset purchase programme to aid a flagging economy. The quantitative easing programme (QE) is seen as negative for the pound as it involves the central bank flooding the market with the currency. The euro was up 0.2 percent at 78.79 pence, extending the previous day's rise following slightly better than expected German and French gross domestic product data. The UK's annual consumer price rise is expected to dip to 2.3 percent in July from 2.4 percent in June, when inflation unexpectedly fell sharply. However, some analysts said most in the market already expect further action from the BoE in November. It may therefore take a very weak number, which might prompt talk of earlier action, to have much impact on the pound in a thin market. "Traders are still sitting on 'lazy' short euro positions that they need to cover and we're seeing euro/sterling push up in an otherwise thin market," said Michael Derks, chief strategist at FXPro. "If the inflation numbers are benign, and if further data produce more concern about the economic malaise, that will push the Bank of England in the direction of wanting to take more action." Against the dollar, sterling was up 0.1 percent at $1.5702. This brought it near a two-week high of $1.5717 reached on Monday as improved risk appetite, higher share prices and expectations the European Central Bank will take action soon to lower Spanish and Italian borrowing costs dampened safe-haven demand for the dollar. But investors were likely to be wary in a busy week for UK data, with unemployment and retail sales figures due for release, as well as the minutes to this month's BoE Monetary Policy Committee decision. Figures last month showed the UK economy shrank 0.7 percent in the second quarter, marking its third consecutive quarter of contraction, and surveys since then have pointed to a poor start to the second half of the year. Some analysts say a cut in interest rates from their record low 0.5 percent may still be a possibility. However, this looks less likely after BoE governor Mervyn King suggested last week a rate cut might be counterproductive. (Editing by John Stonestreet)

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