Sterling slips against dollar as traders await central bank decisions

LONDON, Nov 1 (Reuters) - Sterling fell slightly against the dollar on Wednesday as traders braced for the Bank of England's policy announcement on Thursday, while staying focused on the U.S. Federal Reserve's meeting later in the day.

At 1118 GMT, sterling was down 0.17% against the dollar to $1.2133.

"GBP/USD is holding steady after modest losses in the previous session as the market looks ahead to the Federal Reserve interest rate decision later today," said Fiona Cincotta, senior financial markets analyst at City Index.

Markets are expecting no change to the Fed's current policy. Manufacturing and jobs data out of the U.S. will also be in focus, as is the yen, which is hovering at its lowest in a year against the dollar and at a level that is raising expectations of potential intervention.

Mortgage lender Nationwide said British house prices unexpectedly rose by almost 1% in October, though the increase was due more to a lack of homes for sale than a turnaround in the market which has been hit by a jump in borrowing costs.

The better-than-expected housing data provided a modest sentiment boost for the pound against the euro, said Nicholas Rees, FX market analyst at Monex. The common currency fell 0.15% against the pound to 86.89 pence.

"Even so, this likely overstates the improvement in the UK property market conditions given the slowdown in activity as marginal would-be mortgage borrowers are squeezed out of the market," said Rees.

In the latest sign of a downturn, Britain's factories suffered a worse October than previously thought, according to a survey on Wednesday.

A weakening economic backdrop could encourage policymakers to keep interest rates on hold at 5.25%, said Cincotta.

Money markets are placing a 92% chance that the BoE will hold rates unchanged in its coming meeting on Thursday.

Economists at RBC also expect the BoE's Monetary Policy Committee to hold rates steady and see the central bank's hike in September as its last in the current rate hiking cycle.

"...since the last MPR (monetary policy rate) in August, the data has largely supported the decision to hold, pointing to a loosening in the labour market (from what we can tell), slowdown in economic activity and easing inflation," wrote RBC economists in a note.

The British currency clocked three straight months of losses from August til October, shedding 5.5% in that time.

(Reporting by Lucy Raitano; Editing by Sohini Goswami and Alison Williams)