* Month-end demand pushes euro higher vs GBP-traders
* Sterling slips against the dollar
Aug 28 (Reuters) - Sterling fell to a three-week low against the euro on Tuesday as investors bought the single currency to meet month-end requirements, although the pound struggled against the dollar in the light of a soft UK economic outlook.
The latest quarterly poll by the Confederation of British Industry showed business in Britain's dominant service sector shrank between June and August and confidence dwindled as firms reported a lack of demand, suggesting that any recovery from recession will be long and arduous.
The euro was up 0.4 percent against the pound at 79.45 pence, having risen to a three-week peak of 79.55. The euro also gained against the dollar as investors grew a bit more confident that the European Central Bank would deliver bold measures next week to stem the debt crisis.
The ECB said its chief Mario Draghi will not attend the annual Jackson Hole meeting of central bankers at the end of this week due to a heavy workload. The ECB holds its policy rate meeting on Sept. 6.
Speculation is mounting that it will announce a bond-buying programme to lower borrowing costs for Spain and Italy. Any such measure will see the euro rally against most currencies, including sterling, traders said.
"The gains in euro/sterling due to possible month-end requirements have been a catalyst for the euro's broad rise," said a London based spot trader.
Against the dollar, sterling slipped 0.1 percent to $1.5780 , retreating further from last week's three-month high of $1.5912, despite buying from sovereign investors.
Technical analysts highlighted strong resistance around $1.5910, the 61.8 percent retracement of the late April to early June fall from above $1.63 to around $1.5270.
Investors are cautious before Friday's speech by Federal Reserve Chairman Ben Bernanke at an annual meeting of central bank chiefs at Jackson Hole, Wyoming.
Any hint the Fed is considering another round of quantitative easing could lift perceived riskier currencies, including sterling, against the safe-haven dollar. That, along with likely measures from the ECB, could give a short-term boost to the pound.
Barclays' head of European FX research, Paul Robinson, said if the ECB does deliver on bold measures, sterling could retest $1.59, but any strength may be short-lived.
"The UK economy is significantly weaker than the U.S. economy and over the next few months I think that will dominate," he said.
A second reading of UK second quarter GDP on Friday showed the recession was not quite a deep as initially estimated but the economy still contracted by 0.5 percent.
That kept alive chances of more quantitative easing (QE) by the Bank of England later in the year. More QE hurts a currency as it increases the supply.
