FOREX-Dlr firm before US retail data, pound slips

(Changes dateline, byline, adds quotes, updates prices)

By Veronica Brown

LONDON, May 13 (Reuters) - The dollar firmed against a basket of currencies but gains were contained by the risk that U.S. retail sales data due later on Tuesday may cloud expectations for a pause in the U.S. rate cut cycle.

Sterling lost the most ground against the U.S. currency as domestic factors came in to play, with housing and retail sales data weighing on sentiment.

British consumer price figures due on Tuesday are expected to reflect rising inflationary pressures, deepening the Bank of England's policy dilemma as it struggles to balance slowing growth with rising inflation.

The U.S. central bank, having slashed borrowing costs by 325 basis points since September to 2 percent, is expected to pause the easing campaign aimed at limiting damage caused to growth by the ongoing credit crunch.

Nagging doubts remain however on whether enough has been done by the U.S. government and Federal Reserve to get the ailing U.S. economy back on track. Retail sales data due at 1230 GMT could well reflect that, analysts said.

A slew of Federal Reserve officials, including Fed Chairman Ben Bernanke, will also speak on credit markets and the economic outlook later in the day and could flesh out thinking on the prospect of a pause in cutting rates.

"The range of expectations (for U.S. retail sales) is pretty wide as people weren't quite sure what to do with (the impact of an early) Easter, so they may be bracing themselves for a bit of a surprise on which way it's going to go," ING head of currency strategy Chris Turner said.