* Sterling falls against firmer dollar
* Fed officials increase calls for Fed to scale back QE
* Drop below 6-week low of $1.5173 could spark big falls
* But pound seen gaining versus euro on better UK outlook
LONDON, May 17 (Reuters) - Sterling fell against a broadly firmer dollar on Friday after U.S. Federal Reserve officials called for the central bank to scale back its monetary stimulus.
Signs of improvement in the U.S. economy and speculation the Fed could reduce or end its asset-buying programme, which is typically negative for a currency, have emboldened investors to buy the dollar.
This was expected to keep the pound under pressure against the dollar although analysts said it could rise against the euro, which was vulnerable due to speculation that the European Central Bank could cut interest rates further.
"Sterling is caught up in the recent bout of dollar strength," said Stephen Gallo, European head of FX strategy at BMO. But he said falls were likely to be limited, keeping it above $1.50 while the pound gained against the euro.
"We think euro/sterling will go lower on the basis of the macroeconomic divergence between the UK and the euro zone."
Sterling was down 0.2 percent at $1.5233. More falls would bring it closer to Wednesday's six-week low of $1.5173, with traders saying it could fall sharply if it breaks below this level.
Currency markets responded in particular to comments by John Williams, the president of the Federal Reserve Bank of San Francisco, who said the Fed could completely exit its easing by the end of the year.
The euro was up 0.1 percent at 84.43 pence, staying above chart support at 83.98 pence, a low reached on April 26 which was its weakest since late January.
Expectations of ECB rate cuts come as the UK economic outlook improves, with the Bank of England looking likely to keep monetary policy steady for the next couple of months.
On Wednesday, the BoE raised its growth forecasts and issued a slightly more upbeat outlook. However, investors were wary that incoming governor Mark Carney could opt for easing measures to boost the economy when he takes over in July.
"Euro/sterling is likely to continue to struggle to break out of the 0.84-0.85 range, but the more positive recent sterling sentiment suggests short term risks are towards a test of the downside," Lloyds analysts said in a note to clients.
