* Focus on ECB policy review later on Thursday
* Aussie bolstered by upbeat retail sales data
* Yen holds steady after recent rally
By Patrick Graham
LONDON, Feb 6 Global currency markets trod water
ahead of interest rate decisions in Britain and the euro zone on
Thursday, although the Australian dollar stood out with a gain
of more than half a percent against its U.S. equivalent.
While there is much speculation the European Central Bank
will take action to bolster banking liquidity, few players are
ready to bet heavily on a cut in euro rates, judging the bank
has room to wait after a mixed bag of data in January.
Euro zone inflation fell to just 0.7 percent last month and
retail sales numbers on Wednesday were disappointing but recent
business sentiment surveys continued to be more positive.
Most banks are convinced the ECB will have to take some form
of action to support growth in the next few months, however, and
that has left many downbeat about the euro's prospects against
the dollar this year.
"We don't think the bank will want to be seen as reacting
every time there is a poor readout on (current) inflation, so I
would say nothing on rates today," Bank of Tokyo
Mitsubishi-UFJ's head of global market research Derek Halpenny
"On liquidity, there may be more uncertainty. But any
squeeze higher for the euro (on a lack of action) will be
Australia's dollar has jumped more than 2 percent this week
thanks to the Reserve Bank dropping its bias towards lower
interest rates and toning down a long-term call for the currency
That put a halt to a months-long slide in the Aussie due to
worries over Australia's economic prospects in the face of lower
commodities prices and a slowdown in China.
A batch of more positive data overnight helped it gain 0.6
percent against the dollar and some traders reported a
handful of banks going long on the Aussie against the euro
ahead of the ECB decision.
"The positive macro story in Australia is starting to
build," said Phyllis Papadavid, strategist with BNP Paribas in
London. "We have been positive on the Aussie for some time and
have gone long against the (New Zealand) kiwi."
The euro held steady at $1.3528, above a two-month
low near $1.3477 that had been set on Monday. Against the yen,
it was little changed near 137.08 yen, staying above
an 11-week low of 136.25 yen struck on Tuesday. The dollar also
held roughly steady at 101.36 yen.
So far this week, the dollar is down around 0.5 percent
against the yen, with the Japanese currency benefiting from its
role as a safe haven in the recent selloff of emerging market
equities and currencies. The emerging sector was mostly higher
Mixed U.S. data on Wednesday offered little support for the
greenback. Growth in the service sector picked up pace in
January while private employers added 175,000 jobs in January,
the smallest gain since August.
Still, many analysts are optimistic that the closely watched
U.S. non-farm payrolls report on Friday will show January hiring
rebounded after a weak December, which saw a payroll gain of