LONDON: Sterling hovered near a 22-month high against the euro on Thursday and could push higher if a services sector survey adds weight to impressions that the UK economy, though fragile, is faring better than an ailing euro zone. The purchasing managers survey on the UK's dominant services sector is due at 0828 GMT and is expected to show a reading of 54.2 for April, down from 55.3 in March but still well above the 50 mark that separates growth from contraction. The euro was at 81.25 pence, staying close to a low of 81.13 pence hit on Wednesday, its weakest level since June 2010. Further falls would see it target the 2010 low of 80.67 pence, with most analysts expecting it to continue dropping towards the 80 pence mark, a level not seen since the aftermath of the collapse of Lehman Brothers in 2008, as investors seek alternatives to the euro. Although UK manufacturing PMI data earlier this week missed expectations, it still showed the sector in expansionary territory, in contrast to Wednesday's euro zone PMI which revealed a much deeper-than-expected contraction. "Even if the services PMI disappoints comparatively the UK is in such a better state than the euro zone ... euro/sterling has definitely got further to fall," said Richard Driver, analyst at Caxton FX. The common currency was broadly weak before a European Central Bank decision and news conference later, which is likely to strike a dovish tone on the euro zone's growth outlook, and ahead of an auction of Spanish debt. The ECB is widely expected to keep interest rates on hold. Against a trade-weighted basket of currencies, sterling was at 83.4, near its recent 32-month high of 83.6, according to Bank of England data. Sterling has performed well since Bank of England minutes for April suggested chances were lessening that the central bank will opt for more asset purchases under its quantitative easing programme, given policymakers' concerns about high inflation. BoE governor Mervyn King echoed that tone on Wednesday as he warned inflation was still too high even as he said the economy was recovering more slowly than policymakers had hoped. King said on Thursday he expected a steady, slow recovery throughout 2012.

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