* ECB expands asset purchases at policy meeting
* Pound falls as Brexit deadline extended to Sunday
* Dollar slightly weaker as further U.S. stimulus discussed
* Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E
LONDON, Dec 10 (Reuters) - The euro rose on Thursday after the European Central Bank unveiled fresh stimulus measures broadly in line with expectations, while sterling fell after post-Brexit trade talks were extended to the weekend in hope of an elusive breakthrough.
The ECB increased the overall size of its Pandemic Emergency Purchase Programme by 500 billion euros ($605.40 billion) to 1.85 trillion euros and extended the scheme by 9 months to March 2022, with the aim of keeping government and corporate borrowing costs at record lows.
The move did not surprise investors as the central bank had made it clear more easing was on the way and bond purchases, along with liquidity facilities for banks, would form the backbone of any policy response.
The euro, which was about 0.1% up against the dollar prior to the announcement, rose to 0.3% and reached a session high at $1.2118.
Traders were still awaiting a press conference by ECB head Christine Lagarde for any comment on the recent rise of the currency on foreign exchange markets.
Among other positive developments for the euro zone, EU leaders in Brussels seemed close to unblocking a stalled 1.8 trillion euro package to help revive their pandemic-ravaged economies.
Poland and Hungary have opposed the package because access to the money was, for the first time, to be linked to respecting the rule of law.
Against the pound, the euro rose 1% to 91.10 pence, while sterling sustained losses of 0.8% against the dollar, retreating to $1.3295.
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.
The European Commission laid out contingency plans for a ‘no-deal’ Brexit at the end of the year to limit disruption to air traffic, and road and rail travel.
Bank of England Governor Andrew Bailey has said a no-deal Brexit would cause more lasting damage to Britain’s economy than the COVID-19 pandemic.
The Swiss franc, seen as a safe haven in the Brexit crisis, briefly rose to 1-month high versus the euro in morning trading but cut its gains gradually.
At 1301 GMT one euro was exchanged for 1.07525 Swiss franc.
The dollar rose 0.2% slightly to 104.41 yen.
The U.S. dollar, which tends to fall when risk appetite is strong, was down 0.2% against a basket of major currencies as agreement on U.S. stimulus remained elusive. ($1 = 0.8259 euros) (Reporting by Julien Ponthus; Editing by Gareth Jones and Barbara Lewis)
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