Banks help Britain's FTSE continue grind higher

* FTSE 100 up 0.1 percent

* Banks buoyed by LTRO early repayment

* Imperial Tobacco sinks 4.9 pct after update

By Tricia Wright

LONDON, Jan 30 (Reuters) - Gains in banking stocks helped nudge Britain's top shares into positive territory on Wednesday, with the FTSE 100 index trading around 4-1/2 year highs as part of a rally some technical strategists reckon will continue.

The FTSE 100 was up 3.46 points, or 0.1 percent, at 6,342.65 by 1204 GMT, having rallied around 20 percent off its June lows.

"I'm still optimistic; it's not doing anything wrong, and without a trend-ending pattern, or a trend-ending scenario, my inclination as a trend follower would be to assume the move can continue," Barclays Capital's chief European technical strategist Phil Roberts said.

Roberts has 6,377, the May 2008 peak, as the next target and beyond that, the 6,433 level - where the rally off the low in Aug. 2011 to the high in March 2012 would be replicated off the low in June 2012.

"It's just interesting to see that any dips have been really short-lived this year which just goes to show that there's still momentum in the uptrend," Angus Campbell, head of market analysis at Capital Spreads, said.

The UK banking sector advanced 0.4 percent after lenders decided to repay the European Central Bank 137.2 billion euros ($184.9 billion) in three-year loans from its Long Term Refinancing Operations (LTRO).

Banks have opted to hand back the money early in a sign that at least parts of the financial system are returning to health.

There was a note of caution to Wednesday's trade as investors awaited U.S. data releases, namely the January ADP national employment report, a precursor to Friday's January U.S. jobs data, and U.S. fourth-quarter GDP data.

Much of the focus will fall on the U.S. Federal Reserve's latest policy decision, due after the London market close.

The Fed is expected to maintain asset buying at $85 billion a month and retain the commitment to hold interest rates near zero until the unemployment rate falls to 6.5 percent.

Imperial Tobacco limited the FTSE 100's gains, the biggest drag on the index on Wednesday in terms of points, after saying it expects growing competition from the black market in cigarettes to hit its first-half profits.

Its shares fell 4.9 percent in brisk trade, with volume at 159 percent of its 90-day daily average against the FTSE 100 on just 37 percent of its 90-day daily average.

Oil services stocks also came under pressure, knocked by a profit warning from Italy's Saipem.

Petrofac was left nursing a 5.8 percent drop, while Wood Group shed 2.1 percent, and Amec traded 1.1 percent lower.

($1 = 0.7420 euros) (Reporting by Tricia Wright; editing by Stephen Nisbet)