UPDATE 1-Sterling holds gains as budget provides few shocks

(Updates after UK budget at 1405 GMT)

By Samuel Indyk

LONDON, March 6 (Reuters) - The pound held onto slight gains against the dollar on Wednesday as traders digested Britain's latest fiscal plans, possibly the last budget before an election expected later in the year.

Sterling was last up about 0.1% at $1.2724, just shy of a one-month top of $1.2735 reached on Tuesday, although within its narrow $1.2501-$1.2825 range held since mid-November.

Against the euro, the pound was down slightly at 85.55 pence.

Finance Minister Jeremy Hunt offered no surprises in his latest statement, announcing a two percentage point cut to National Insurance Contributions (NICs), while freezing fuel and alcohol duty, as rumoured before the announcement.

"It was pretty much in line with what we expected," said Kirstine Kundby-Nielsen, FX analyst at Danske Bank.

"You can see that from the market reaction with gilts and sterling both pretty steady."

Britain's 10-year gilt yield was up around 1 basis point at 4.025%, broadly in line with where it was trading before the announcement.

Hunt will have been pleased to avoid the gilt turmoil of his predecessor in September 2022, when unfunded tax cut plans sent bond markets into a tailspin and pushed the pound to a record low against the dollar.

The pound has recovered and is one of the only major currencies that has managed to keep pace with the stronger dollar this year, amid a more robust UK growth outlook and stickier inflation.

That has left the Bank of England as one of the more hawkish central banks, with markets pricing in just over 50 basis points of easing this year, the equivalent of two quarter-point cuts.

In contrast, markets are pricing in 90 bps of easing from both the Federal Reserve and European Central Bank in 2024.

But analysts don't expect Hunt's budget to alter the growth or inflation outlook for the BoE to change tact.

"Most of the main measures were already in the media over the weekend, there were no real surprises, and the government has played it relatively safe," said Lee Hardman, senior currency analyst at MUFG.

"From an economic perspective that limits the near term stimulus for the economy, so doesn’t really alter expectations for Bank of England policy."

(Reporting by Samuel Indyk, additional reporting by Alun John; Editing by Alison Williams and Barbara Lewis)