(There will be no London market report on Monday, Aug. 31 due to the bank holiday.)
* Sterling above $1.33 for first time in 2020
* Greggs slips on report COVID-19 outbreak closes Leeds depot
* FTSE 100 down 0.6%, FTSE 250 up 0.2%
* BOE has more ammunition to support economy - BOE's Bailey
(Adds comments, updates prices to close)
By Sagarika Jaisinghani and Shreyashi Sanyal
Aug 28 (Reuters) - London's FTSE 100 index closed its second week lower on Friday as traders headed into the long weekend worried about a choppy post-pandemic economic rebound, while Greggs slipped on a report a COVID-19 outbreak had forced it to close its depot in Leeds.
The exporter-heavy FTSE 100 .FTSE was down 0.6%, also pressured by the sterling which touched an eight-month high as the dollar fell in the aftermath of a speech by Federal Reserve Chairman Jerome Powell.
Historic global stimulus has helped UK equity markets in their fourth monthly increase in five, but the pace of gains has slowed as economic data points to a slower-than-expected recovery from a pandemic-induced slump.
"As markets have turned decidedly more risk-on, correction fears are mounting," Barclays (LON: BARC ) analysts wrote in a note.
"A pullback is of course possible, but we remain of the view that the unwind of the massive flight to safety seen year-to-date is likely closer to the beginning than the end."
Bank of England Governor Andrew Bailey said the central bank has more ammunition to support the economy and that big, aggressive bond-buying pushes are most effective when crises strike. mid-cap FTSE 250 .FTMC rose 0.2%, with homebuilders .FTNMX3720 leading gains.
Earlier, Japanese financial markets fell after news that Prime Minister Shinzo Abe will resign for health reasons. MKTS/GLOB
"The surprise announcement made a lot of headlines, but it didn't have a huge impact on stocks in Europe," said David Madden, market analyst at CMC Markets UK.
"Things have been a little directionless today, partially because there has been a lack of local news, but it is likely that UK-based traders are winding down ahead of the long weekend."
Baker Greggs GRG.L shed 1.6% as the report said its distribution centre had been temporarily closed for a deep clean after an undisclosed number of staff tested positive for COVID-19.
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