Sterling trades above $1.52, but lags euro on soft UK data

(Recasts, adds details, IMF downgrade)

LONDON, Oct (HKSE: 3366-OL.HK - news) 6 (Reuters) - Sterling rose 0.4 percent against a struggling dollar on Tuesday, as investors fretted about when the U.S (Other OTC: UBGXF - news) . Federal Reserve will raise interest rates amid growing doubts over a global recovery.

The International Monetary Fund (IMF) cut its global growth forecasts for a second time this year on Tuesday, citing weak commodity prices and a slowdown in China and said policies aimed at increasing demand were needed.

The Fed has cited the slowdown in China as one of the reasons for keeping interest rates unchanged in September. A weak jobs report last week saw investors push back the chances of a lift-off to early 2016, having priced in a robust chance of a hike in December, putting the dollar under pressure.

Sterling rose to $1.5210, recovering from a five-month low of $1.5107 struck last Thursday. It (Other OTC: ITGL - news) , however, underperformed the euro, weighed down by soft economic data that have pushed back market expectations of monetary tightening by the Bank of England towards the end of next year.

The IMF also trimmed growth prospects for Britain, and expects the economy to grow at 2.5 percent in 2015 and 2.2 percent in 2016.

A much weaker-than-expected reading of the services sector purchasing managers' index (PMI) on Monday saw analysts cut forecasts for UK growth for the third quarter. And data released on Tuesday showed UK house prices fall in September, highlighting subdued consumer demand.

The euro was up 0.2 percent at 74 pence.

"If the weakness in the economy continues -- which given the external challenges from abroad is more likely -- the Bank of England will struggle to justify the case being made for a rate hike in the near future," said Andy Scott, economist at HiFX.

The BoE's monetary policy committee meets later this week and while it is widely expected to keep rates at record lows, policymaker Ian McCafferty could be the sole member who is likely to vote for a rate hike.

Others in the nine-member committee are set to vote for no change in rates. Rate hike chances in Britain took a knock after Friday's U.S. non-farm payrolls shocked markets out of any expectations the Federal Reserve will hike rates this year.

Investors have been expecting the BoE to follow the Fed in raising interest rates, given a pick up in wages and an improving labour market in Britain. But that view is being challenged, prompting investors to cut bullish positions.

"The soft economic data from the UK have acted as factors which have resulted in expectations for an interest rate hike by the BoE being pushed back, contributing to pressure on the pound," said Lukman Otunuga, analyst at FXTM.

"Technically sterling/dollar remains bearish on the daily timeframe, with many seeing the $1.5100 level as a probable bottom." (Editing by Alison Williams)