RTRS:Sterling rises to one-week high against weak euro
* Euro dented by weak euro zone business surveys
* Pound rises to 79.89 pence per euro
* But sterling falls against dollar, tracking euro falls
* UK retail sales, CBI factory survey better than forecast
LONDON, Sept 20 (Reuters) - Sterling rose to a one-week high against a broadly weaker euro on Thursday as poor euro zone business activity data fanned concerns about a deepening recession in the region.
But the pound tracked the euro lower against the dollar, with dealers concerned about the impact of a fragile euro zone economy on the UK, which has strong trade links with Europe.
The euro fell 0.6 percent to a low of 79.89 pence, breaking below reported stop loss sell orders at 79.95 pence to mark its weakest since Sept. 12.
The single currency fell as gloomy euro zone purchasing managers' surveys suggested the European Central Bank's plan to buy the bonds of indebted euro zone countries has yet to bolster business confidence.
"The big news is definitely the euro zone PMI data, which is telling us we may get even weaker growth in the euro zone," said Guillermo Felices, currency strategist at Barclays.
"That's what's given the euro and European currencies such as sterling a reality check. We had seen very aggressive rallies in the euro and sterling against the dollar."
The euro traded well below a three-month high of 81.14 pence hit on Friday and further losses could see it target its 100-day moving average at 79.66 pence.
Analysts and traders said the PMI data encouraged investors to take profit on the euro's recent strong gains sparked by the ECB bond buying plan and by aggressive monetary easing in the United States.
Similarly traders continued to take profit on the pound's recent rise to a 4-1/2 month high against the dollar.
The pound showed little reaction to data showing UK retail sales weakened in August, albeit by slightly less than forecast. The results were distorted due to a negative impact from the London Olympics.
Sterling fell 0.2 percent to $1.6190, off its recent peak of $1.6276 hit after the U.S. Federal Reserve announced aggressive monetary easing last week which dented the U.S. currency.
Some UK data recently, including signs of falling unemployment and a strong rise in industrial production, has suggested the economy may have recovered in the third quarter.
A survey on Thursday by the Confederation of British Industry showed British factory orders improved more than expected in September, with the total order book balance rising to -8 from -21 in August.
However, Bank of England minutes on Wednesday showed some policymakers felt the UK economy may need more stimulus, keeping alive speculation the central bank may extend its 375 billion pound asset purchase programme in November.
Paul Robson, currency analyst at RBS warned against getting overly optimistic about the UK economy, adding there was "no sign the UK will bounce back strongly". He forecast the euro would rebound towards 83 pence over the next month. (Reporting by Jessica Mortimer/editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)
