* Euro steady after big falls in last two sessions
* Prospect of ECB policy action may keep currency pinned
LONDON May 12 The euro started the week on a
steadier footing, looking to comments by European Central Bank
officials and a flow of data for fresh direction after two
straight sessions of losses.
Dealers said the market had calmed after a turbulent
reaction to ECB President Mario Draghi's statement last week
that the bank was "comfortable" with easing monetary policy in
Analysts said appearances scheduled by some of Draghi's
colleagues - most notably Bundesbank chief Jens Weidmann - might
provide more clarity on whether the bank is really ready to act.
The macroeconomic factors that have bolstered the euro this
year - to the surprise of many banks - have not disappeared,
though. Few analysts were willing to stick their necks out and
predict a further sharp fall for the euro.
"If last week's move was to fully discount a June easing of
policy by the ECB, I think the risk is that the data and the
comments from policymakers this week will be on the hawkish
side," said Adam Cole, global head of FX strategy with RBC
Capital Markets in London.
The common currency, which plumbed a one-month trough of
$1.3745 on Friday, inched 0.1 percent higher on the day
to $1.3771 in early European trade. It has shed roughly 1.7
percent since hitting a 2-1/2-year high of $1.3995 on Thursday.
Against the yen, the euro edged up 0.2 percent to 140.32 yen
, not far from a two-month trough of 139.88 set on
One major barrier in the short term to a weaker euro, as ECB
policymakers have made clear they would prefer, is the lack of
any evidence of broader interest in the dollar.
A year of gains for the U.S. currency was the central
scenario of many banks at the start of 2014. The failure of the
U.S. economy to launch higher and provoke the Federal Reserve
into a clear promise of higher interest rates have shaken those
The dollar fell just over 0.1 percent against sterling
and is still within sight of the long-term resistance at
$1.70. It was flat against the yen
"While I still think the euro is in the process of peaking,
the most likely catalyst for a durable turn in the trend is a
push higher in US (market) rates, rather than lower euro ones,"
said Kit Juckes, a strategist with French bank Societe Generale
"Only dramatic ECB action - large-scale asset purchases and
an explicit commitment to weaken the currency - would change the
trend independently of what happens in the U.S. and I don't
think the ECB has the inflation forecasts to justify that."
With its decline since Thursday, the euro has retreated
toward the middle of its range so far this year. Possible
support lies at that midpoint of its 2014 range near $1.3735,
and the euro's 100-day moving average at about $1.3740.
Austrian central bank governor Ewald Nowotny and ECB Vice
President Vitor Constancio both speak on Monday. Weidmann, seen
as the chief opponent to dramatic policy easing by the ECB,
speaks on Wednesday.
Investors will also be keeping an eye on developments in
Ukraine amid fears the country is sliding into civil war.
Pro-Moscow rebels on Sunday declared a resounding victory in a
referendum on self-rule for eastern Ukraine.
(Editing by Larry King)