* Pound edges up after UK lending data shows improvement
* But traders cautious before BoE meeting on Thurs
* Inflation Report on Aug. 7 also a risk factor
* Caution as BoE seen announcing forward guidance in Aug
By Jessica Mortimer
LONDON, July 29 Sterling edged higher against a broadly weaker dollar on Monday, underpinned by further signs of improvement in the UK economy, though gains were expected to be limited ahead of a Bank of England meeting this week.
Figures showed lending to small and medium-sized British firms grew at the fastest pace on record in June while money supply growth picked up.
But traders were wary because the BoE, under new governor Mark Carney, is expected to lay out plans for forward guidance of monetary policy which could weigh on the pound.
A statement accompanying the bank's decision on monetary policy on Thursday could provide some details on its forward guidance policy, although a fuller outline will not come until next week's Quarterly Inflation Report. No changes to interest rates or quantitative easing are expected this week.
The pound rose 0.15 percent to $1.5405, edging near a one-month high of $1.5435 struck on Thursday.
But Nawaz Ali, market analyst at Western Union Business Solutions, said concerns about the BoE policy outlook would outweigh any firmer UK data.
"A more dovish and more unfamiliar Bank of England policy framework is probably what the market is expecting and this should prove damaging for sterling."
The pound was also helped by a broadly lower dollar, which was weak on concerns the U.S. Federal Reserve could signal it intends to keep rates low for some time at a meeting this week.
Sterling remained weak against the euro, which was steady at 86.25 pence and close to a peak of 86.435 pence reached on Thursday.
More gains for the euro could see it target a four-and-a-half month peak of 87.12 pence, hit in mid-July, although analysts said caution before this week's raft of central bank meetings was likely to keep major currencies within a range.
The European Central Bank also meets on Thursday. (Editing by Susan Fenton)