LONDON, Aug 30 (Reuters) - Sterling steadied on Friday but was set to end the week slightly lower after strong U.S. data underpinned the dollar.

The pound was last up 0.1% at $1.3181 yet was set to finish the week down 0.22%. The euro was slightly lower against the pound at 84.05 pence.

Investors on Friday were waiting for the release of the U.S. personal consumption expenditures price index, the Federal Reserve's preferred inflation gauge, at 1230 GMT (8:30 a.m. ET).

Sterling has fallen after hitting a two-year high against the dollar on Tuesday, with stronger-than-expected U.S. economic data on Thursday helping boost the American currency.

The pound rallied over the previous two weeks, supported by investor expectations that the Bank of England will cut rates less sharply than the Federal Reserve in the coming months, after making its first reduction in August.

The euro remains around its lowest against the pound in two years as investors expect faster rate cuts from the European Central Bank than the BoE. Euro zone inflation slowed sharply to 2.2% year-on-year in August, data showed on Friday.

"A rebound in EUR/GBP now requires a meaningful rebuilding in Bank of England easing expectations," said Francesco Pesole, currency strategist at ING.

"That seems unlikely to happen until we get new tier-one data in the UK, as BoE officials have broadly reiterated a cautious stance on easing."

Data on Friday did little to budge sterling ahead of the U.S. figures. British lenders approved the highest number of mortgages in July since the start of the "mini-budget" crisis in 2022 under former Prime Minister Liz Truss, according to Bank of England figures.

Separate data showed British house prices unexpectedly fell in August for their first monthly drop since April, although they remained 2.4% higher than a year earlier.

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https://www.reuters.com/markets/currencies/sterling-steady-heads-weekly-fall-dollar-strength-2024-08-30/