Sterling falls after PMI softer than expected

LONDON, April 3 (Reuters) - The pound extended losses versus the dollar and briefly fell versus the euro while short sterling extended gains on Thursday after UK services PMI came in softer than expected increasing expectations of rate cuts from the Bank of England.

UK services PMI index came in at 52.1, its weakest since November 2007 and below the consesus forecast of 53.3.

"The PMI confirmed that the market is pointing to a BoE rate cut next week, which pushed sterling lower," said James Hughes, market analyst at CMC Markets.

By 0839 GMT the pound fell as low as $1.9760 GBP= from $1.9783 before the data. The euro rose as high as 79.09 pence from 78.80 pence before the data before moving back into negative territory at 78.75 pence.

The short sterling strip <0#FSS:> extended gains to trade between 3 and 11 ticks higher. The June long gilt future FLGM8 rose to stand 14 ticks higher at 110.70. (Reporting by Naomi Tajitsu and Simon Falush)