* Sterling dips after UK Q2 GDP grows 0.6 pct, as expected
* Some traders had positioned for a better number
* Caution as BoE seen announcing forward guidance in Aug
By Jessica Mortimer
LONDON, July 25 (Reuters) - Sterling fell on Thursday after data showed the UK economy grew by a solid 0.6 percent in the second quarter, in line with forecasts but disappointing some in the market who had positioned for a better number.
Sterling fell as low as $1.5264, before recovering some of its losses to last trade flat on the day at $1.5322. However, this was still around half a cent below where it traded just before the data on UK gross domestic product (GDP) was released.
The euro also gained 0.2 percent to hit a one-week high of 86.435 pence against the pound.
Traders also refrained from buying sterling before a Bank of England meeting and inflation report early next month as they expect some form of forward policy guidance, which could weigh on the pound.
“The GDP result came in in line, but expectations had run ahead in recent days, which explains sterling’s reaction,” said Lena Komileva, director of consultancy G+ Economics.
“The BoE’s forward guidance could yet surprise markets on the dovish side, which is what markets are starting to price in.”
The pound stayed well below chart resistance at $1.5393, Tuesday’s one-month high, and the 61.8 percent retracement from the June 17 peak to the July 9 trough at $1.5394.
Although the GDP data suggested the UK was recovering, it showed the economy was 3.3 percent smaller than at its pre-crisis peak in the first quarter of 2008.
Sterling has risen more than 3 percent since hitting a three-year trough of $1.4814 in early July, helped by BoE minutes which unexpectedly showed all nine Monetary Policy Committee members were opposed to extending stimulus.
However, investors remained concerned about the possibility that new BoE governor Mark Carney may be inclined to opt for further monetary easing.
“The uncertainty that has been introduced with Carney being there is quite significant because there is a risk for more expansionary policy and he will want to leave his mark,” said Axel Merk, president and CIO of Merk Investments.
“The risks for sterling to be substantially weaker are much greater than for sterling to be significantly higher.”
Caxton FX analyst Richard Driver said any rise above $1.55 could be a good level to sell, especially as the U.S. Federal Reserve is expected to start scaling back monetary stimulus later this year, which will boost the dollar. (Editing by Susan Fenton)