LONDON, Oct 10 - Sterling eased slightly against the euro and dollar on Friday as markets wondered if UK rate hike expectations should be scaled back after the Bank of England kept interest rates on hold on Thursday. With an empty UK data calendar, markets chewed over the central bank's decision to leave rates at their 48-year low of 3.5 percent and the belief it would be the first of the major central banks to raise borrowing costs. Most had predicted the BoE's decision but some in the market had bet on the outside chance of a hike on Thursday. However, some soft data recently has led some analysts to question the previously bullish outlook on rates. "I think sterling will come under a little bit of pressure as rate hike expectations are pushed back in the wake of recent weak data," said Ian Stannard, foreign exchange strategist at BNP Paribas.
"Although generally most people were going for unchanged in rates on Thursday, there were a few positions in the market looking for a surprise rate hike." By 0805 GMT, sterling was down a third of a percent on the day at $1.6610 . It was down 0.13 percent versus the euro at 70.55 pence per euro , though still firmer than the previous session's low of 71.17 pence that matched Wednesday's 10-week low. Weaker than expected UK manufacturing output data this week and a rise in the August global trade deficit to 3.6 billion pounds have softened some recently firm sentiment on sterling. No major UK data releases were scheduled on Friday. Monday will see September producer prices and the British Retail Consortium's retail sales monitor.//