LONDON, Sept. 16 (MNI) - Sterling remained on the back foot into early European dealing Wednesday, following on from Tuesday's sell- off on comments from Governor Mervyn King which suggested the Bank of England is looking at reforming reserve remuneration.

Euro-sterling took the lead as it extended recovery gains to stg0.89305. Release of stronger-than expected UK employment data has provided some respite and allowed for some paring of losses, cable correcting back above $1.6500, while euro-sterling eased back under stg0.8900.

STERLING SUMMARY: Opened early Europe at $1.6458, stg0.8913

range of $1.6480/95 before getting a lift on general dollar pressure, taking it up to challenge resistance in the area between $1.6510/15. Rate topped out at $1.6515, reversing as euro-sterling picked up a bid tone with traders turning focus onto the stg0.8900 barrier. Despite UK clearer defence efforts the level eventually gave way, taking the cross to stg0.8918, while cable sank bank through the rest of the session, marking lows at $1.6456 ahead of the European open before extending move to $1.6431. Early Europe saw dip buyers emerge, taking the rate to $1.6480, while euro-sterling, which had extended highs to stg0.89305, dropped back to stg0.8910. Cable corrected back to $1.6455, then recovering to sit above $1.6470 ahead of UK jobs data. Stronger-than-forecast data spiked rate to $1.6508, dropping back on profit-take sales, before finding support at $1.6570. Rate recovered again, extending to $1.6520, as euro-sterling eased under stg0.8900.

UK:Reported comments from UK officials Wednesday, * BOE: Bank of England's executive director for financial stability Andrew Haldane says the UK financial system had seen "a fairly remarkable recovery" in the last six months. Haldane made the comments in an interview to the Yorkshire Post during a visit to Leeds But the sector is hardly back to a state of "rude health" and he forecast a "lengthy adjustment" period ahead for the financial industry. * BOE SENTANCE: Sees economy starting growth over next year - Better climate for investment in period ahead - Things won't improve overnight - Will take time employment/investment to recover - Seeing signs of improvement in some sectors - House market appears to be picking up - Heavilly affected sectors seeing some recovery - Sees stabilisation and improving confidence - Sees more sustained recovery as UK enters into 2010 - Mixed reports suggest economy at turning point - UK economy may have even passed turning point - Q3 GDP may show return of growth - Bound to be unceratinty on strength of recovery - Business confidence has recovered. - News has been positive over last two months - but doesn't change fact UK has seen deep recession - MPC to focus on sustainability in UK economy.

UK:Press pick-ups in the UK Wednesday, * UK PRESS: Representatives of the defunct Lehman Brothers estate asked a US judge to re-open the contract that transferred the bank's North American assets to Barclays Capital a year ago, claiming that up to $8bn in cash and securities was transferred to BarCap without the court's knowledge, the FT says. * UK PRESS: The European Commission has warned Lloyds Banking Group that it may have to split off the Halifax as punishment for the billions of pounds of state aid that it has received, The Times reports. Neelie Kroes, the EC's Competition Commissioner, has yet to make a final decision, but the paper cites sources saying it is clear that she is planning to impose draconian penalties on Lloyds. * UK PRESS: UK institutional investors could boycott Government attempts to relist the UK's state-owned banks on the stock market if they continue to be allowed to renege on their debt obligations, the head of the main lobby group for bondholders warns, the Times says. Stephen Haddrill, the director-general of the Association of British Insurers (ABI), has spoken out for the first time about part-nationalised banks that fail to make interest payments, or coupons, due on their bonds, the paper says.

UK:Data released in the UK Wednesday, * Aug claimant count unemployment +24,400 m/m; Rate 5% - May-Jul ILO unemployment +210,000 q/q; rate 7.9% - Jul headline average earnings +1.7% vs +2.5% in Jun - Jul headline average earnings ex bonuses +2.2% vs +2.4% in Jun - ILO unemployment rose sharply in the latest 3 months, up 210k on the quarter pushing the rate to 7.9% the highest since Sep-Nov96, slightly below the median for a rise to 8%. The more timely claimant count measure was up 24,400 m/m in Aug, in line with the median, pushing the claimant count rate to the highest since 97. There was some evidence that the change in the ILO and claimant count over the latest 3 month period have diverged with ILO unemployment up by 185k compared with a rise of 108k in the claimant count on a like for like basis. Earnings growth was very subdued with the headline rate falling to 1.7% below the median of 1.9%. Ex bonuses growth fell to 2.2% the lowest since 2001.

Rates in London Trading TIME EURO-USD USD-YEN CABLE EURO-YEN EURO-STG 0500 GMT 1.4670 91.09 1.6458 133.62 0.8913 0600 GMT 1.4680 90.95 1.6445 133.51 0.8926 0700 GMT 1.4692 90.60 1.6467 133.10 0.8922 0800 GMT 1.4702 90.27 1.6480 132.71 0.8921 0900 GMT 1.4703 90.17 1.6492 132.57 0.8915 1000 GMT 1.4590 91.17 1.6500 133.00 0.8842