Sterling flat, helped by upbeat construction numbers

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By Patrick Graham

LONDON, July 2 (Reuters) - Sterling was broadly steady against the dollar and euro on Thursday, helped in the margins by a brighter number on sentiment in the UK construction sector but stalled by events around Greece and the wait for U.S. jobs numbers.

At 58.1 points versus a forecast 56.5, the PMI survey showed construction activity in Britain grew at its fastest rate in four months in June, and confidence in the sector surged to an 11-year high after a lull in the run-up to May's national election.

That was reflective of a UK economy that continues to outstrip its peers in Europe on the back of a handful of housing hotspots and London's financial might, putting rises in interest rates back on the table for the end of this year.

"Everyone feels quite good about it, but there seems little conviction to drive (sterling) sharply higher with all the bigger doubts about growth, rates and Greece out there," said a trader with one international bank in London.

"The bottom line with sterling over the past month is that trade has been very balanced."

By 1014 GMT, the currency stood respectively at $1.5612, from $1.5587 beforehand, and 0.2 percent weaker against the euro at 70.93 pence per euro.

Traders said there would be little action on sterling ahead of U.S. non-farm payrolls data later on Thursday. Those come a day early due to a holiday in the United States on Friday, which will mean volumes thereafter into the weekend should be minimal.

There is also the prospect that Greece's referendum on accepting austerity demanded by the euro zone in return for aid will send a shock-wave through currency markets, making traders nervous about putting on aggressive bets before then.

Keng Goh, a strategist with RBC Capital Markets in London, said service sector PMI on Friday might prove more important for sterling, also noting a 0.2 percent fall in house prices in June according to data from lender Nationwide.

"We certainly like sterling on a medium term basis," said Sam Lynton-Brown, a strategist with BNP Paribas (Xetra: 887771 - news) in London. "Although the manufacturing PMI yesterday was a touch weaker, Tuesday's GDP numbers were good and the outlook for the pound is strong.

"That said, we're quite cautious in the short term because our indicators of short-term fair value suggest it should be lower at around $1.54. So we do see value in the medium term but until we see a correction lower, we are reluctant to get into the position."

BNP (Paris: FR0000131104 - news) has sterling gaining steadily against the euro over the course of the next few months but it also projects the pound at $1.50 by the end of the year, reflecting its forecasts for the euro to fall to $1.02. (Additional reporting by Anirban Nag Editing by Mark Heinrich)