* Euro takes hit from objections to bond-buying
* Constitutional Court also leaves door open to acceptance of programme
* Market steadies ahead of U.S. payrolls
By Patrick Graham
LONDON, Feb 7 The euro fell back against the dollar on Friday, hit by criticism of the European Central Bank's bond-buying programme by a German court and by the prospect of U.S. jobs data that is likely to underline the contrast with a fragile euro zone.
One consensus among analysts this year is that the ECB will have to pump more money into the financial system to prop up growth, while U.S. officials are easing back on their own bond-buying, weakening the euro against the dollar.
Lack of action from the ECB at a policy meeting on Thursday led to a small shakeout of some of those bets. But the euro retreated after Germany's Constitutional Court referred a complaint against ECB bond-buying to the European Court of Justice.
By referring the issue on, the court may have removed the prospect that Germany will try to curb the programme but left the ECB unable to take action within the framework for the foreseeable future. A halt in sterilisation of the bond-buying has been seen by many analysts as one relatively easy way to send more money coursing through the banking system.
"The ECB has to quickly assess what repercussions the ruling will have for the range of tools available to calm markets," said Christian Schulz, senior economist at Berenberg. "Ironically, depending on the exact decision, the court may have made a much more wide-ranging quantitative easing programme at the ECB more likely."
After the court statement, the euro fell as low as at $1.3552 before recovering to $1.3566, still well off highs above $1.36 reached after the ECB's policy statement on Thursday.
QE MORE LIKELY?
U.S. non-farm payrolls on Friday is expected to show recovery in the world's biggest economy is on track, but there are substantial risks to the central forecast of 180,000 in new jobs.
Disappointing figures a month ago were viewed as marred by poor weather, which has continued over the past month. A negative surprise from the closely watched ISM business survey earlier this week also spooked markets.
Private payroll processor ADP's report on Wednesday showed businesses added 175,000 jobs in January, slightly below forecasts but still above the 74,000 reported by the Labor Department in December.
"We think that if the number today comes in close to consensus it could be enough to reassure the market," said Josh O'Byrne, currency strategist with Citibank in London.
Bart Wakabayashi, head of forex at State Street Global Markets in Tokyo, said the big picture of an end to the Fed's bond-buying later this year was still intact, no matter what the jobs reports shows.
"I think in general, people are in agreement that it's not a tapering story as opposed to just a reevaluation of their positions," Wakabayashi said.
Even if labour conditions improve, Boston Federal Reserve President Eric Rosengren said late Thursday that the central bank should be "quite patient" in removing stimulus because broader measures of the U.S. labour market remain weak.
Rosengren, considered a dovish Fed official, said the labour market conditions remain far from those which would warrant higher interest rates.