Sterling jumps after bumper UK Q2 GDP data

* Stg jumps 1.2 pct vs dlr, up nearly 2 cents from day's low

* UK Q2 GDP up 1.1 pct q/q, fastest in 4 years

* Last week's 2-1/2 month high of $1.5473 in view

By Jessica Mortimer

LONDON, July 23 (Reuters) - Sterling enjoyed broad gains on Friday, jumping nearly 2 cents above the day's low against the dollar after data revealed the UK economy grew at its fastest rate in four years during the second quarter.

Official figures showed gross domestic product jumped 1.1 percent on the quarter, almost twice as fast as forecasts for 0.6 percent growth, and rose by 1.6 percent on the year -- the biggest increase in two years. [ID:nAHLMIE64J]

Analysts said the data showed the economy entered the second quarter of the year on a much firmer footing than previously thought and it may raise questions about how long the Bank of England will keep interest rates at record low levels.

Investors stayed cautious, however, ahead of the release of European bank stress test results later in the day, while economists expressed concerns that the UK economy may struggle in the second half of the year.

"The data was expected to be good and it came in much better than expected, so sterling has got quite a boost from this," said Ian Stannard, currency strategist at BNP Paribas.

At 1104 GMT, sterling was up 1.2 percent on the day against the dollar GBP=D4 at $1.5438, having hit a session high of $1.5450, nearly 2 cents above the day's low of $1.5259.

This brings last week's high into view around $1.5473 -- the pound's strongest level since late April. Beyond there, the April high of $1.5524 could be targeted.

Traders said clearing the $1.5500 level may be difficult, however, with options barriers seen at that level.

The pound also rose against the euro EURGBP=D4, with the single currency losing 0.8 percent to 83.78 pence.

CAUTION AHEAD

Analysts and traders said sterling's gains may be limited, however, as later in the day the focus would switch to the European bank test results, due at 1600 GMT, which are likely to make investors wary of taking on risk.

They also warned that the second-quarter growth figures were likely to be as good as it gets for the UK, with the economy facing a number of headwinds as the government slashes public spending in an attempt to reduce high levels of debt.

"In the near term sterling could see more gains, but longer term the picture is more bearish as some of the more forward-looking indicators on the UK have been declining recently, which could leave the pound vulnerable," BNP Paribas' Stannard said.

Data from the British Bankers' Association on Friday showed mortgage approvals in Britain fell 8 percent in June from a year ago, while mortgage lending growth also slowed. [ID:nLAC005753]

"Household confidence has been heading down recently and significant concerns over the strength and sustainability of the recovery may well be intensified by the extra austerity measures that were announced in June's emergency budget," Howard Archer, economist at IHS Global Insight said in a note to clients. (Editing by Susan Fenton)