* Euro gains broadly after PMI, German Ifo data
* Sterling stumbles on weak UK Q2 GDP
* Risk demand intact, some analysts doubt further big rise
(Adds quotes, updates prices, changes byline)
By Naomi Tajitsu
LONDON, July 24 (Reuters) - The euro rose broadly on Friday, buoyed by figures showing the euro zone economy is stabilising and German business morale is rising, which suggested that economic activity in the region is improving.
Currencies considered to be high-risk rose slightly as European shares added to a nine-day winning streak, but sterling suffered after data showed the UK economy contracted at a much sharper-than-expected rate in the second quarter.
Analysts said the euro's rise against sterling following the figures underlined the contrast between the solid euro zone data and weak UK ones.
Market participants have speculated the UK economy will recover faster than the euro zone, and while that view remains intact, some said Friday's move suggested that recent sterling gains on that belief may have been overdone.
"If you put into context the German Ifo and UK GDP, data people are trying to add relative value to the euro," said Geoffrey Yu, currency strategist at UBS in London, explaining the rise in euro/sterling.
He added: "Equities are trying to recover, and that's also going to help euro/dollar higher."
The Ifo German business sentiment index rose for a fourth month running to its highest since October 2008, while initial estimates showed that the euro zone services and manufacturing sectors contracted much less sharply than expected in July.
At the same time, UK gross domestic product fell by 0.8 percent on the quarter in April-June, taking the annual decline to 5.6 percent. That was far worse than forecasts for a decline of 0.3 percent and followed a hefty 2.4 percent drop in the first quarter.
STERLING SLIPS
By 1100 GMT, the euro traded 0.7 percent higher at 86.45 pence, near the day's high of 86.53 pence, according to Reuters data. The pair was on track to post its best daily performance since the start of the month.
The single European currency rose half a percent to $1.4233, after climbing as high as $1.4245. Its gains helped to nudge the dollar index down 0.2 percent on the day.
Still, the single currency remained comfortably below a seven-week high of $1.4292 on trading platform EBS on Thursday.
A 0.4 percent rise in European shares also helped to support sentiment for riskier currencies including the Australian and New Zealand dollars, which each rose more than half a percent against the dollar.
Risk demand pushed the yen broadly lower, nudging the euro and the Australian and New Zealand currencies each around 0.3 percent higher, although the dollar slipped 0.1 percent to 94.82 yen.
Sterling fell 0.2 percent against the dollar to $1.6441, retreating from the day's high of $1.6542 as the GDP figures suggested a UK recovery could take longer than previously thought.
Analysts said the weak UK figures helped to remind investors that the global economy remains weak, and added that investors were becoming more tentative about pushing risk demand higher.
Generally solid corporate earnings has boosted risk appetite this week, but some in the market have pointed out that others have been weak and added that strong performance for the quarter may not automatically point to strength in the future. (Additional reporting by Jessica Mortimer, editing by Ron Askew)