Sterling struggles for direction as market awaits economic data

LONDON, Feb 20 (Reuters) - Sterling fell slightly against the dollar on Monday and was flat against the euro, in a quiet session ahead of flash composite PMIs due on Tuesday which will give more hints on the state of the UK economy.

By 1130 GMT on Monday, the pound was down 0.1% against the dollar to $1.20320 and virtually unchanged against the euro at 88.810 pence.

Data from property website Rightmove on Monday showed asking prices for British residential property rising by the smallest increase on record for that month, which normally sees a big seasonal increase.

But the fact that asking prices remained flat rather than falling could be a positive signal for the housing market, suggesting a softer landing than many analysts have forecast, Rightmove said.

The market is looking ahead to the Bank of England's next meeting in March, with an 80% chance of a 25 bps rate hike currently priced in. The bank rate stands at 4% after ten consecutive increases by the central bank since late-2021.

Traders will be listening closely to speeches from Monetary Policy Committee members Sam Woods and Catherine Mann this week for hints over the BoE's next move as it battles to bring down inflation.

Focus also remains on hints of progress toward a potential deal to revise the Northern Ireland protocol, but the news so far has had little impact on the pound, according to ING FX analysts.

"Here, eurosceptics in the Conservative party, including former PM Boris Johnson, will try to thwart any progress. And Sunak will be reluctant to have to rely on opposition Labour votes to win progress in parliament," said ING FX analyst Chris Turner in a note.

Turner points instead to monetary policy as the main driver for sterling, expecting "EUR/GBP to stay range-bound and GBP/USD to be bounced around by the dollar trend."

(Reporting by Lucy Raitano; Editing by Deepa Babington)