Stg falls vs dlr but gains against soft euro

* Sterling down 0.4 percent versus dollar at $1.9848

* Negative view on UK economy, housing sector weighs

* Weak services PMI highlights headwinds

* Sterling gains versus broadly softer euro

LONDON, July 3 (Reuters) - Sterling fell against the dollar on Thursday after soft services data reinforced a view that the UK economy is facing stiff headwinds, denting any expectations that the Bank of England is set to hike rates this year.

Britain's services PMI shrank for a second consecutive month in June and at its sharpest rate since October 2001 in a sign that the economic slowdown is gathering pace.

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"PMI services was lower than the previous month and that has removed a high risk that the Bank of England might hike rates next month, and my view is that they are not going to raise rates in the current environment." Trevor Williams, head of group economic research at Lloyds TSB, said.