Sterling slides before BoE, UK PMI impact short-lived

* Sterling falls, traders brace for BoE policy meeting * Pound jumps after strong UK PMI, then pulls back * Factory PMI jumps to 2-year high in October

LONDON, Nov 2 (Reuters) - Sterling slipped on Monday, snapping a five-day winning streak against the euro as traders braced for the possibility the Bank of England may announce it will increase its asset-buying programme later in the week.

A surprising jump in UK manufacturing data helped to curb losses against the dollar and the euro, but the pound stayed on the ropes, hit as traders also awaited a British government announcement of a banking sector overhaul.

Sterling's short-covering rally has spluttered, pulling the UK currency back from its highest levels in more than a month hit in late October, and analysts said traders were unwilling to take on big bets before the BoE policy announcement on Thursday.

"With the possibility of more quantitative easing looming, no one is willing to bet the ranch on this one," said Daragh Maher, senior currency strategist at Calyon in London.

A Reuters poll showed most analysts expect the BoE will increase its 175 billion pound asset-purchasing plan by 25 billion pounds to stimulate further the struggling UK economy. [BOE/INT]. Some in the market see a rise of as much as 50 billion pounds.

Sterling GBP=D4 traded 0.4 percent lower at $1.6370 by 1120 GMT, retreating after jumping more than half a cent after the CIPS/Markit purchasing managers index of manufacturing activity rose to 53.7 in October from September's 49.9. [ID:nL2579102]

The figure marked the fastest pace of growth since November 2007 and beat forecasts for a 50.0 reading.