* Euro steady after big falls in last two sessions
* Prospect of ECB policy action may keep currency pinned
* ECB's Nowotny says rate cut not enough to combat low
* Little sign of broader push higher for dollar
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 pointed to appearances by some of Draghi's
colleagues - most notably Bundesbank chief Jens Weidmann - as
possible sources of more clarity on whether the bank is really
ready to act. The euro took a tiny dip after Austrian central
bank chief Nowotny was reported as saying it would take more
than a cut in interest rates to combat low inflation.
The macroeconomic factors that have bolstered the euro this
year have not disappeared, however, and few analysts were
willing to stick their necks out and predict a further sharp
fall for the currency.
"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 euro, which plumbed a one-month trough of $1.3745
on Friday, was less than 0.1 percent higher on the day at
$1.3759. It has shed roughly 1.7 percent since hitting a
2-1/2-year high of $1.3995 on Thursday.
Against the yen, the single currency edged up 0.1 percent to
140.21 yen, not far from a two-month trough of 139.88
set on Friday.
"At least Draghi got things going somehow last week. We've
had the kneejerk move now we need to see if it will go further,"
said a dealer with one bank in London.
"I think the euro will trade heavy for the next week or two
but as we get closer to the ECB's June meeting there will then
be the uncertainty of will they, won't they."
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.
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."
Weidmann is due to speak on Wednesday, while the ECB's
German Executive Board member Sabine Lautenschlaeger speaks on
Tuesday. German officials have proven the most vociferous
opponents of more aggressive policy easing in the past.
(Editing by Toby Chopra)