* Pound up 0.1 pct at $1.6458 GBP= * Stg edges up as equity markets add to gains By Nick Vinocur LONDON, July 27 (Reuters) - Sterling edged up against the dollar and euro on Monday as confidence in the strength of corporate earnings propelled further gains in world equities and helped the UK currency recover losses after poor growth data. The pound rose above $1.65 in early trade after UK Hometrack data showed house prices in England and Wales were flat in July, suggesting a slowdown in the rate of decline but also a long path to full recovery in Britain's housing market. Healthy appetite for risk, however, helped crude prices rise over $68 per barrel and put the FTSE 100 Index on track for its 11th consecutive day of gains. The rise in risk appetite has also aided sterling over the last two weeks, on Monday helping it recover from disappointing second quarter UK data on Friday which showed the economy contracted more than 5 percent in annual terms. [ID:nLO44167] Analysts said sterling would continue to firm if equities added to gains this week, but they said it would be capped by the relatively poor performance of the UK economy and doubts whether stock markets have priced in too aggressive a recovery. The pound could also stumble if second quarter U.S. growth figures, due out on Friday, proved disappointing to the market and prompted "safe haven" moves away from risk. "Sterling is traditionally very highly-correlated to the performance of equities, and here we see some quite positive performance which has not translated into clearly positive moves for sterling," said Ian Stannard, a strategist at BNP Paribas. "The fact that markets are pricing in a more aggressive recovery might lead to some disappointment, and that could well provide the dollar with some support and weaken sterling." U.S. gross domestic product is expected to show the economy contracted for a fourth consecutive quarter in April-June, the first time that has happened in records dating to 1947. Some analysts expect it to be the recession's last negative quarter. By 0836 GMT, sterling rose 0.1 pct at $1.6458 GBP=D4, after hitting a session high of $1.6525. Earlier, it fell as low as $1.6382. Against the euro, it was up 0.1 percent at 86.53 pence EURGBP=R. MORE QE? A Bank of England quarterly report on its asset purchase facility released on Monday said conditions in the UK corporate credit market improved in the second quarter. [ID:nLAJ002228] It also said market contacts reported some evidence the central bank's corporate bond purchases improved liquidity in the three months to June. Minutes from the BoE's July meeting released last Wednesday signalling muted optimism about Britain's economic prospects provided the impulse for sterling buying. But Friday's UK GDP data suggested recovery could be slower than previously thought and added fuel to speculation over additional stimulus measures from the Bank of England, which has already embarked on a 125 billion pound quantitative easing programme. With a light data schedule this week, investors will be focus on consumer credit data from the Bank of England on Tuesday, and CBI distributive trade on Wednesday. Analysts said the pound might well tread water until next week when the BoE announces its decision on whether or not to extend its programme of quantitative easing.

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