(Reuters) - Sterling rose against a weakened dollar on Monday, with most investors preferring to stay away from the U.S. currency after politicians in Washington came up short in talks to avoid a debt default that is just days away. Tokyo was shut for a holiday and markets in the United States were partially closed, keeping volumes low. The pound was up 0.1 percent at $1.5975 with the currency also supported by recent merger and acquisition news. The euro was flat against the pound at 84.89 pence, not far from a six-week high of 85.10 pence struck on Friday. Traders said growing concerns that the UK economic recovery may not be as robust as previously thought was weighing on the pound compared to the single currency. A British consumer price inflation report for September is due on Tuesday but the focus this week will be on unemployment data for August on Wednesday, forecast to show a steady reading of 7.7 percent. Mansoor Mohiuddin, head of currency strategy at UBS said that if the jobless rate remained sticky and did not fall towards the 7 percent threshold rate that the BoE is targeting, then markets could push back expectations for a first rise in interest rates. "This keeps us wary of sterling/dollar at current levels of around $1.60." A steady flow of forecast-beating numbers lifted sterling nearly 8 percent against the dollar and more than 5 percent against a basket of currencies between early August and early October as investors bet the bank would have to raise rates before 2015. But recent UK data has fallen short of expectations. The chance of a first rate hike, as reflected in the sterling overnight interbank average, has been nudged back to the first quarter of 2015, compared to the late 2014 that markets were pricing in a month ago.

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