BUZZ-COMMENT-Thursday's monthly UK data dump key for confidence

Jan 16 (Reuters) - The monthly UK data dump assumes greater importance after a sharp fall in interest rates in response to slightly softer UK inflation on Wednesday. GDP, construction, industrial and manufacturing production provide a broad snapshot of the economy, and resilient data would underpin market sentiment.

The Oct 30 UK budget included a range of company tax increases to fund increased social spending, which was poorly received by markets, amid inflation fears leading to fewer Bank of England rate cuts.

Ten-year gilt yields have risen by 60 basis points, from a 4.317% close on Oct 29 to as high as 4.921% on Jan 9. Higher Treasury yields, a string of mixed UK data and a sequence of broad-based weak business confidence surveys have weighed on sentiment and sterling.

Wednesday's slightly softer UK inflation coincided with slowing core U.S. inflation. Treasury yields fell, but gilt yields led the way amid dovish comments from BoE interest rate setter Alan Taylor; 10-year gilt yields fell 17 bps to 4.728%, supporting market sentiment.

GBP/USD has been trending lower since late September amid broad USD strength, fuelled by resilient data and rising Treasury yields. Five, 10, and 21 daily and weekly moving averages trend lower with 21-day Bollinger bands, which is a strongly bearish setup.

Sterling needs a close above the well-tested falling 1.2425 21-DMA for bulls to get excited.

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(Andrew Spencer is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)

((Andrew.m.spencer@thomsonreuters.com))