Sterling slips after hitting 10-month highs following Fed meeting

LONDON, July 27 (Reuters) - Sterling edged lower after touching a 10-month high against the dollar on Thursday, with some investors taking profits after the U.S. Federal Reserve left policy unchanged and hinted interest rates might rise more slowly than expected.

The pound got some support from a retail sales survey by an industry body, keeping any weakness confined within recent broad trading ranges.

A Confederation of British Industry's latest Distributive Trades Survey, published on Thursday rose to a three-month high in July.

"The impressive figures gave sterling a much-needed shot in the arm," said David Madden, a FX strategist at CMC Markets.

With the dollar skidding across the board, the pound took advantage, climbing as high as $1.3157, its highest since mid-September, in early trades. By 1600 GMT on Thursday it had eased back to $1.3065, down 0.4 percent on the day.

The market focused on the Federal Reserve's noting, after its latest meeting ended on Wednesday, that both overall and core inflation had declined. Traders took that as reflecting concern that a slowdown in consumer price rises might not be temporary, and hence rate increases will come more slowly than they had expected.

Against the euro, it has been a different story for sterling. The single currency has rallied both on dollar weakness and expectations that the European Central Bank will tighten monetary policy, and the pound has fallen to eight-month lows in recent weeks.

It gained some ground on Thursday but was still less than a cent away from that low, at 89.23 pence per euro.

"Last year’s high at 93 pence remains possible; however, a break below 89 pence could well open up a move back to the support at 88.70/80 in the short term," said Michael Hewson, CMC Markets strategist.

Data on Wednesday showed Britain's economy gathered only a little speed in the second quarter after almost stalling at the start of the year, curtailing expectations the Bank of England would raise rates in the coming months.

Bank of America Merrill Lynch strategists expect no changes in interest rates at next week's BoE policy meeting with the central bank likely to adopt a "wait and see" approach.