FOREX-Euro stable ahead of ECB stimulus, pound dips on Brexit fears

* ECB seen expanding asset purchases at policy meeting
* Pound falls 0.7% as Brexit deadline extended to Sunday
* Dollar stands ground as further U.S. stimulus discussed
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Julien Ponthus
LONDON, Dec 10 (Reuters) - The euro stood its ground on
Thursday ahead of the European Central Bank unveiling fresh
stimulus measures, while sterling fell after post-Brexit trade
talks were extended until the weekend in pursuit of an ever
elusive breakthrough.
ECB officials have made clear in recent weeks that a bigger
Pandemic Emergency Purchase Programme (PEPP) and more subsidised
long-term loans for banks will form the backbone of policy
measures. Economists polled by Reuters expect the 1.35 trillion euro
PEPP to be expanded by at least 500 billion euros and its
duration extended by six months to the end of 2022, with risks
skewed towards a bigger and longer extension.
"These adjustments are unlikely to have a significant effect
on the euro even if the adjustments are going to be a little
more pronounced than the market expects", Commerzbank analyst
You-Na Park-Heger wrote in a morning note, adding that it would
take an unexpected move such as a rate cut to put the currency
under pressure.
Another potential surprise development would be the ECB
President Christine Lagarde taking an equally unexpected
"bazooka" strong stance against the recent rise of the euro,
Park Heger argued, adding that in her view, "we are unlikely to
see more than a toothless tiger today".
At 0800 GMT, the euro was just slightly up against the
dollar, rising 0.04% to $1.2086.
Against the pound, however, the euro rose 0.7% to 90.80
pence while sterling sustained similar losses against the
dollar, retreating to $1.3317.
The British currency fell overnight after British Prime
Minister Boris Johnson and European Commission President Ursula
von der Leyen gave negotiators until the end of the weekend to
decide if a trade pact can be struck after failing to bridge
gaps themselves.
"There's still clearly some scope to keep talking but there
are significant points of difference that remain," Foreign
Secretary Dominic Raab told BBC TV on Thursday morning.
Bank of England Governor Andrew Bailey has said a no-deal
Brexit would cause longer-term damage to Britain's economy than
the COVID-19 pandemic, and the impact of the change might be
felt for decades. Elsewhere, the Australian dollar rose 0.44% to $0.7450
AUD=D4 , approaching the 2 1/2-year high of $0.7485 reached on
Wednesday, while the offshore Chinese yuan also hovered below
its 2 1/2-year high set on Wednesday to trade at 6.5385 per
dollar CNH= .
The dollar rose 0.3% slightly to 104.55 yen JPY= .
The U.S. dollar, which tends to fall when risk appetite is
strong, held firm overall and was flat against a basket of
major currencies as agreement on a U.S. stimulus remained
elusive, with proposals and counterproposals on COVID-19 aid
flying around the U.S. Capitol.