LONDON (Reuters) - The pound fell on Monday as investors focused on the relative strength of the U.S. economy, pushing up the dollar.

Sterling was last down 0.2% at $1.3023, just above Thursday's two-month low of $1.2975.

The euro was up 0.1% at 83.35 pence, although it remained near its lowest level in 2-1/2 years against Britain's currency.

The U.S. dollar has climbed against its peers in recent weeks as the economy has fared better than expected.

Last week, data showed retail sales grew more than anticipated in September and jobless claims fell the previous week, helping moderate investors' bets on Federal Reserve rate cuts and pushing up Treasury yields.

By contrast, figures released last Wednesday showed British inflation fell more than expected in September to 1.7%, below the Bank of England's 2% target, causing traders to increase their bets on deeper rate cuts in the UK.

British 10-year bond yields fell below those on U.S. bonds for the first time since mid-August last week, making dollar-denominated U.S. debt look more attractive and boosting the dollar.

This week, investors will be focused on comments from Bank of England Governor Andrew Bailey, starting with a speech tomorrow, and purchasing managers' index data on the private sector's performance in October.

"We still think the market is under-pricing the pace of the BoE easing cycle," said Chris Turner, global head of markets at ING.

"Should Bailey add to some of his rare comments that the BoE could become more 'activist' in its easing, sterling could come under pressure."

Turner added: "Thursday's release of the UK PMI should also have a big say on whether sterling continues to outperform or perhaps succumbs to some dovish BoE rhetoric."

The pound has fared better against the euro in recent weeks as data has shown the euro zone economy performing worse than expected.

The euro fell to a 2-1/2 year low against the pound at 82.96 pence on Friday.

(Reporting by Harry Robertson; Editing by Sharon Singleton)