* Sterling climbs versus euro, 79.50 pence in sight * Dovish BoE policymakers fail to dent sterling * Data shows public sector borrowing rose in May By Nia Williams LONDON, June 26 (Reuters) - Sterling rose against the euro on Tuesday, shrugging off dovish comments from Bank of England policymakers as rising peripheral bond yields reflected concerns a European Union summit this week would make little progress in tackling the debt crisis. BoE governor Mervyn King said the outlook for the UK economy had deteriorated in recent weeks due to turmoil in the euro zone, reinforcing expectations the bank will opt to expand its asset purchase programme to boost growth. Although quantitative easing is often considered negative for a currency, some analysts said the market had already priced in more QE, meaning the impact on sterling was limited. "The MPC (Monetary Policy Committee) is united on the need for very loose monetary policy and we know there are a lot of doves on the board," said Jane Foley, senior currency strategist at Rabobank. "With respect to the pound, euro/sterling has gone lower but that's a euro move. As QE is expected, it should not impact sterling too much." The euro fell around 0.5 percent against the pound to a near 4-week low of 79.85 pence, after breaking through support around 80.11 pence. Strategists said the next target was the 3-1/2 year low of 79.50 hit last month, although the euro would probably also have to weaken further versus the dollar to push below that level. More QE has been seen as increasingly likely since minutes from the last BoE policy meeting showed a narrow 5-4 split in favour of hold off from additional stimulus. UK public sector net borrowing figures showing the government borrowed more than expected in May added to concerns about the health of economy and cast doubt on the government's deficit reduction plan. Sterling was steady against the dollar at $1.5582, with resistance seen on technical charts around $1.5662, a 23.6 percent retracement of an early-to-mid-June rally. EURO ZONE CONCERNS While signs of weakness in the UK economy were likely to weigh on the pound against the safe haven dollar and yen, many analysts said sterling should outperform the euro as European officials struggle to find a solution to the debt crisis. Spanish short-term borrowing costs nearly tripled at auction on Tuesday, highlighting investors' concerns about the country's fragile banking system and a deepening recession. European leaders meet on Thursday and Friday for the latest attempt to address their 2-1/2-year-old debt crisis and many market players are sceptical they will make any progress. With policymakers seen struggling to agree, some traders were looking to the European Central Bank to ease policy to alleviate strain on peripheral countries. Kit Juckes, currency strategist at Societe Generale, said he had sold the euro against sterling in a long-term trade given the market has not priced in the potential for ECB easing measures. "Euro zone bad news may be 'priced in' but the ECB can, by contrast, eke out a few more basis points of downside or rates," he said in a note.

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