Sterling jumps on short covering before BoE verdict

LONDON, May 8 (Reuters) - Sterling jumped on Thursday, recovering from an early slump against the dollar as traders covered short positions in the currency ahead of a Bank of England announement on interest rates later in the day.

The pound climbed roughly 0.4 percent to $1.9614 <GBP=>, up more than a cent from the day's low.

Sterling gains weighed on the euro, which fell 0.7 percent to the day's low of 78.22 pence <EURGBP=>.

"It's a short squeeze. People have been short sterling over the last couple of weeks, and we are seeing some short covering ahead of the MPC," said a London-based trader.

The BoE will announce its rate decision at 1100 GMT. Many in the market expect the central bank will hold rates at 5 percent.

(Reporting by Simon Falush and Naomi Tajitsu)