Sterling stuck around $1.25 after sentiment slip

* Graphic: sterling and gilt yields

* Graphic: World FX rates in 2016

LONDON, Nov 30 (Reuters) - Sterling steadied in the middle of a 3-cent range it has held for most of the past month on Wednesday, any further progress against a slightly weaker euro undermined by a weaker reading of British consumer sentiment.

Confidence among British consumers fell in November to its lowest level since just after voters decided in June to leave the European Union, the regular survey by market research firm GfK showed on Wednesday.

Investors were also digesting the need for more capital at British bank RBS after it failed the Bank of England’s latest round of stress tests.

With the prospect of Brexit talks next year set to weigh on business and the economy, and the risk that banks will relocate business out of the UK, neither of those were read as positive overall signs for UK Plc.

“The news this morning shows that UK financial institutions are realistically nowhere near capable of fending off another financial crisis,” said James Hughes, chief market analyst at broker GKFX in London.

“Many will say that a global crisis is not on the horizon, however with UK reliant on borrowing from other nations to finance its now growing deficit, the global trend of rapidly increasing debt paints a very worrying picture.”

The pound inched down less than 0.1 percent to 85.32 pence per euro and was roughly steady at $1.2493.

Sterling last week racked up its longest run of weekly gains against the euro since early 2015, helped by a run of data which has broadly failed to deliver signs of the rapid slowdown many had expected after the June referendum.

Data on Tuesday showed lending to Britons expanded last month at the fastest annual pace in 11 years, while mortgage approvals were stronger than expected.

Yet the GfK reading is another sign that the economy does appear to have peaked. Investment readings in the breakdown of British third quarter gross domestic product this week were better than expected, but still showed investment falling in annual terms.

Analysts widely expect the pound to fall further as talks on the departure from the European Union are launched in the first quarter of next year, pointing to the likelihood that the economy will slow further.

But the lack of major further developments on either front has put the pound on the back burner for now for traders in major currencies.

“Tuesday trade saw the currency in decent demand, though it would be overstating things if we were to say the price action was head turning,” analysts from currencies exchange LMAX said in a morning note.

“Ultimately, the Pound remains confined to a range at the moment, with the market waiting for that next catalyst to get things moving.” (Editing by Andrew Heavens)