* Sterling holds within sight of seven-week high vs dollar * Euro outperforms pound after progress seen at EU summit * BoE's Fisher: good chance of another UK recession By Nia Williams LONDON, Oct 27 (Reuters) - Sterling held within sight of a seven-week high against the dollar but underperformed the euro on Thursday as perceived riskier currencies benefited from EU leaders striking a deal on tackling the euro zone debt crisis. Analysts said the pound was vulnerable to any pull-back in risk sentiment, but looked likely to remain supported around $1.60 versus the dollar as long as euro/dollar held near $1.40. In late-night negotiations in Brussels, euro zone leaders struck a deal for private banks and insurers to accept a 50 percent loss on their Greek government bonds, and agreed to beef up the region's rescue fund. Signs that policymakers were taking positive steps to contain the two-year-old crisis helped to boost investor appetite to take on risk, with stocks also rallying strongly. Sterling was last trading up 0.2 percent on the day at $1.6002, within reach of the $1.6042 peak hit the previous day which was its highest level since Sept. 8. The pound faced technical resistance just above that seven-week high at the 21-week moving average around $1.6044 and the 55-week average at $1.6047, as well as the Sept. 8 peak of $1.6084. It fell versus the euro, however, with the single currency last trading up 0.7 percent at 87.63 pence. Strong resistance is seen around 88.00 pence as the euro has failed to break above that level since early September. "The reaction to the EU summit has helped risk sentiment across the board although sterling is straggling a little bit compared to other currencies, which could be due to QE in the UK," said Jennifer Hau, G10 FX strategist at Lloyds. "I expect cable will continue to trade in line with risk. The summit results were largely expected and enough to keep risk supported for today, but we are still susceptible to headline shocks." OUTLOOK CLOUDED Sterling's fundamentals remained bleak with Bank of England policymaker Paul Fisher saying on Thursday there was a significant chance the UK could suffer another recession and more asset purchases could be necessary after the current round is completed. Earlier this month the BoE embarked on a second round of quantitative easing aimed at stimulating lacklustre economic growth. QE involves flooding the market with pounds which is seen as a negative for the currency as it dampens demand. On the data front, sterling showed little reaction to a CBI distributive trades survey that showed the decline in UK retail sales eased off in October, although the underlying trend remains weak. Some analysts said despite a poor outlook sterling would remain supported against the dollar due to the fact further QE in the UK has already been announced, while speculation over more monetary easing from the U.S. Federal Reserve has been picking up in recent weeks. "QE is in the price of sterling now. There is probably going to be a natural move towards unwinding long dollar positions given the perception Europe is making progress," said Jane Foley, senior currency strategist at Rabobank. "We could have a soft dollar going into the Fed meeting next week and that will benefit sterling." U.S. GDP data due later in the day is expected to show an improvement on the previous quarter, and could possibly temper speculation that the Fed will resort to further QE before the end of this year. Rabobank's Foley said a strong GDP number would likely spur risk appetite, which could also help support the pound versus the greenback. (Editing by Stephen Nisbet)

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