* Euro sold off at upticks, outlook still poor
* Dollar looks to industrial output data
* UK GDP data cold comfort for sterling (Updates prices, details)
By Anirban Nag
LONDON, Aug 15 The euro was on track for a second week of losses against the dollar on Friday, and hovered near five-month lows against the Swiss franc, on concerns about the euro zone's economic prospects and expectations for more stimulus.
In Britain, a second reading of gross domestic product (GDP) highlighted the divergence between the British and euro zone economies.
The data confirmed that the UK economy grew at its fastest annual pace in over six years. However, it failed to inspire the pound as investors are still winding back bullish bets on the currency after pushing back expectations for a rate hike to the first quarter of next year.
Both sterling and the euro have failed to build on knocks taken by the dollar since the release of lacklustre weekly jobless claims on Thursday and weak retail sales data earlier this week. The spotlight on Friday will be on U.S. industrial output data for July and consumer confidence for August.
Before the U.S. data, investors trimmed short euro bets, helping it to climb to $1.3380, although many were still selling the currency at higher levels. The persistent selling left the euro on course for a second straight week of losses, according to Reuters charts.
It was steady against the Swiss franc at 1.2115 francs, having fallen to a five-month low of 1.2110 francs late on Thursday.
Data on Thursday showed growth in the euro zone stalled in the second quarter, with Germany suffering a surprise contraction. At the same time, inflation in the region was confirmed to have slowed to levels not seen since the height of the financial crisis nearly five years ago, leaving deflation a very real threat.
"With plenty of bad news from the euro zone behind us and investors adjusting their expectations lower, it may be more difficult for euro/dollar to fall from here, based on bad news from the euro zone only," ING analyst Petr Krpata said.
"For a more sustained depreciation, we need to see a shift in the Fed's policy stance - we look towards Jackson Hole later next week and/or the Fed meeting in September as the next opportunities for the Fed to unfold this monetary divergence."
The dollar rose 0.15 percent against the yen to 102.58 yen . The greenback stood to gain 0.5 percent against the yen this week although Treasury yields remained at low levels, with investors noting the emergence of bearish factors for the yen.
"We note that Japanese policy officials are becoming more cautious with regard to their assessment of the economy, suggesting that it is too early to say if Japan is out of deflation," Morgan Stanley said in a note.
"This appears to be a change of tone from the earlier more optimistic views being expressed. Hence, we believe that there is an increased possibility that the BoJ takes further action, putting the yen under pressure."
Sterling remained close to four-month lows of $1.6657 hit on Thursday after the Bank of England indicated on Wednesday that it is in no hurry to raise interest rates.
It was last trading at $1.6890, flat on the day and has shed almost 3 percent since hitting a six-year high of $1.7192 in mid-July when hopes were high for the BoE to hike rates in 2014.
The Canadian dollar rose to trade at C$1.0888, and could add to those gains if an unprecedented revision to July employment data shows more jobs were created than first thought, traders said.
The July version of Canada's market-moving jobs report contained an error and must be restated, the country's main statistics agency said on Tuesday. (Editing by Louise Ireland and Susan Fenton)