February 6, 2014 / 3:45 AM / 4 years ago

FOREX-Euro steady before ECB decision; Aussie up on strong data

* Focus on ECB policy review later on Thursday

* Aussie bolstered by upbeat retail sales data

* Yen holds steady after recent rally

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, Feb 6 (Reuters) - The euro held steady on Thursday ahead of the European Central Bank’s policy review, while the Australian dollar rose as strong data reinforced the view that Australia’s central bank was done cutting interest rates.

Most major currencies stuck to fairly narrow ranges ahead of key event risks, namely the ECB’s policy decision due later on Thursday and U.S. jobs data on Friday.

The euro held steady at $1.3528, hovering above a two-month low near $1.3477 that had been set on Monday.

Speculation that the ECB may be forced to ease monetary policy further to ward off the threat of deflation has weighed on the euro recently, although most money market traders polled by Reuters expect no imminent action from the ECB, believing the central bank would rather wait.

Data released last week showed that annual inflation in the currency bloc slowed to 0.7 percent in January, well below the ECB’s target of just under 2 percent.

“Our view is that if they don’t cut today, they may trim rates in March. We’re forecasting a small cut in March. We wouldn’t rule out something today although it seems unlikely,” said Mitul Kotecha, Hong Kong-based head of global foreign exchange strategy for Credit Agricole.

The euro could see a knee-jerk bounce if the ECB were to hold off from monetary easing on Thursday, but will probably quickly run into selling if there is such a rally, he added.

Against the yen, the euro was little changed near 137.27 yen , staying above an 11-week low of 136.25 yen struck on Tuesday.

The dollar also held steady versus the yen near 101.47 yen, staying above Tuesday’s 11-week trough near 100.76 yen.

So far this week, the dollar is down around 0.5 percent against the yen, with the Japanese currency having gotten a boost from safe haven demand in the wake of a recent selloff in emerging market equities and currencies.

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 just 74,000..

The Australian dollar outperformed after strong data added to the view the Reserve Bank of Australia (RBA) was done cutting interest rates.

The latest bounce came after better-than-expected retail sales in December, which added to evidence that consumer spending was helping revive the economy from a cooling mining boom.

Other data also showed the country boasted its biggest trade surplus in two years in December as exports to China surged to a record A$94 billion for all of 2013. China is Australia’s top export market.

The Australian dollar climbed 0.6 percent to $0.8965 .

The Aussie dollar has gained 2.5 percent so far this week, having rallied after the RBA on Tuesday dropped its easing bias and toned down its campaign of jawboning the currency lower.

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