LONDON (AFX) - The euro was firmer in midday London trade after the release of euro zone services PMI and ahead of the release of the US ISM non-manufacturing index for July, dealers said. Like the euro zone manufacturing PMIs, services figures generally came in above expectations but below the previous month. For services, the French figure led the way, rising 1.1 points to 56.5, the strongest index figure since July 2001. "This chimes in with evidence elsewhere that French consumers are still reasonably healthy," said Sharda Dean, economist at Merrill Lynch. The PMI readings have bucked the weaker trend in indicators such as Germany's Ifo and ZEW, and reassure investors that the recovery is still on track, though it may be going through a temporary pause, said Dean. "But with a softer recovery in store, the European Central Bank won't be raising rates until 2003," predicted Dean. Audrey Childe-Freeman, economist at CIBC World Markets, said news that the euro zone services is holding up quite well, had been supportive for the euro. However, she said the currency market was confined to tight ranges and lacking direction since the de-coupling between the dollar and US shares. "Investors are still wondering whether the weakness in US stocks is a signal for dollar selling," she said. "People are waiting to see how the relationship between US stocks and the dollar develops," she added Citing the rising current account deficit, Childe-Freeman believes that the "risks of a double-dip recession are still higher in the US than in Europe, which should play against the dollar." Neil Mackinnon, chief economist at ECU Group, said euro-dollar is trading in a far steadier range, as investors prefer to take positions at the short-end of the fixed income markets as rate cut expectations mount. In addition, he said the "capitulative" dollar selling over the last few weeks is over, on a growing realisation that the euro zone economy is not going to be immune from the US economy "spluttering to a halt". "Euro-dollar is likely to tread water," he said. "The dollar is better able to absorb the bad news." Today brings the US Institute for Supply Management's overall index of non-manufacturing activity. Economists expect the index to fall to 55.4 in July from 57.2 in June. Meanwhile, sterling was little changed in midday trade despite the large slump in the manufacturing and industrial output. June saw the most severe slump in UK manufacturing output since the 'Winter of Discontent' in January 1979, more than reversing the gains in April and May. "With the service sector still apparently holding up better than expected, the fall in Q2 GDP should be limited to 0.6 pct quarter-on-quarter but the manufacturing side of the UK economy looks increasingly precarious," said Ross Walker, economist at the Royal Bank of Scotland Financial Markets. "It appears that the extent of the decline was highly distorted by the Jubilee weekend, hence the market is not doing much," said Childe-Freeman. "The data is not reassuring in the current doom and gloom environment but we're waiting to see July's data," she said.