Sterling down, output data weighs

* Sterling down 0.8 percent vs dollar at $1.9669

* Manufacturing, industrial output data weaker than forecast

* Eyes on Thursday's Bank of England rate decision

LONDON, July 7 (Reuters) - Sterling fell against the dollar and euro on Monday, as industrial output data added to the gloom on the British economy.

The pound has been knocked by a series of bad news on Britain's housing, banking and retail sectors as companies feel the pinch of a slowing economy.

Data on Monday revealing a fall in British industrial output at its sharpest pace in 2-1/2 years in May further entrenched views that the economy is floundering. Please click on [ID:nL0794817] for more details.

Slowing growth poses the Bank of England, which hold a monetary policy meeting on Wednesday and Thursday, a sharp dilemma as it also faces inflation running well above target.

"(The manufacturing data) adds to the view that activity is slowing sharply," said Chris Turner, head of FX strategy at ING.