* Euro gains broadly after PMI, German Ifo data
* Sterling stumbles on weak UK Q2 GDP
* Risk demand intact, some analysts doubt further big rise
(Adds quotes, updates prices, changes byline)
By Naomi Tajitsu
LONDON, July 24 (Reuters) - The euro rose broadly on Friday,
buoyed by figures showing the euro zone economy is stabilising
and German business morale is rising, which suggested that
economic activity in the region is improving.
Currencies considered to be high-risk rose slightly as
European shares added to a nine-day winning streak, but sterling
suffered after data showed the UK economy contracted at a much
sharper-than-expected rate in the second quarter.
Analysts said the euro's rise against sterling following the
figures underlined the contrast between the solid euro zone data
and weak UK ones.
Market participants have speculated the UK economy will
recover faster than the euro zone, and while that view remains
intact, some said Friday's move suggested that recent sterling
gains on that belief may have been overdone.
"If you put into context the German Ifo and UK GDP, data
people are trying to add relative value to the euro," said
Geoffrey Yu, currency strategist at UBS in London, explaining
the rise in euro/sterling.
He added: "Equities are trying to recover, and that's also
going to help euro/dollar higher."
The Ifo German business sentiment index rose for a fourth
month running to its highest since October 2008 [],
while initial estimates showed that the euro zone services and
manufacturing sectors contracted much less sharply than expected
in July [].
At the same time, UK gross domestic product fell by 0.8
percent on the quarter in April-June, taking the annual decline
to 5.6 percent. That was far worse than forecasts for a decline
of 0.3 percent and followed a hefty 2.4 percent drop in the
first quarter. []
STERLING SLIPS
By 1100 GMT, the euro <EURGBP=R> traded 0.7 percent higher
at 86.45 pence, near the day's high of 86.53 pence, according to
Reuters data. The pair was on track to post its best daily
performance since the start of the month.
The single European currency <EUR=> rose half a percent to
$1.4233, after climbing as high as $1.4245. Its gains helped to
nudge the dollar index <.DXY> down 0.2 percent on the day.
Still, the single currency remained comfortably below a
seven-week high of $1.4292 on trading platform EBS on Thursday.
A 0.4 percent rise in European shares <> also helped
to support sentiment for riskier currencies including the
Australian and New Zealand dollars, which each rose more than
half a percent against the dollar.
Risk demand pushed the yen broadly lower, nudging the euro
and the Australian and New Zealand currencies each around 0.3
percent higher, although the dollar <JPY=> slipped 0.1 percent
to 94.82 yen.
Sterling fell 0.2 percent against the dollar to $1.6441
<GBP=>, retreating from the day's high of $1.6542 as the GDP
figures suggested a UK recovery could take longer than
previously thought.
Analysts said the weak UK figures helped to remind investors
that the global economy remains weak, and added that investors
were becoming more tentative about pushing risk demand higher.
Generally solid corporate earnings has boosted risk appetite
this week, but some in the market have pointed out that others
have been weak and added that strong performance for the quarter
may not automatically point to strength in the future.
(Additional reporting by Jessica Mortimer, editing by Ron
Askew)
