RPT-FOREX-Euro gains foothold after hitting lows before ECB

 (Repeats to more subscribers) 
    * Euro hit overnight after strong U.S. data, Fed 
    * Fed minutes cautious on QE3 taper, but U.S. yields rise 
    * No policy moves expected from ECB meeting, rhetoric eyed 
    * Bullish sterling just off one-year high vs euro 
 
    By Patrick Graham 
    LONDON, Jan 9 (Reuters) - The euro recovered some ground ahead of a European 
Central Bank news conference on Thursday after falling to one-month and one-year 
lows against the dollar and British pound, reflecting concern over Europe's 
poorer growth outlook. 
    The dollar traded close to seven-week highs against a basket of major 
currencies after an upbeat U.S. private-sector jobs report drove U.S. short-term 
yields and market rates higher and raised expectations for key payrolls data 
later this week. 
    But sterling was also a winner, pumped higher over the past six months by 
expectations an improving economy will make the Bank of England the first major 
central bank to raise interest rates next year. 
    The pound has come back from a blip early this week, which followed its 
failure to rise past $1.66, and alone among the major currencies it rose against 
the dollar after Wednesday's upbeat jobs numbers. 
    The market has shown some signs of nerves about the chances of the BoE 
making an extraordinary post-meeting statement on Thursday to tweak its message 
on unemployment and make clear it is in less of a hurry to raise interest rates. 
    Without such a statement, most analysts said the currency should remain 
strong. 
    "We view anything from the BoE as highly unlikely," said Tom Levinson, 
foreign exchange strategist with ING in London. "Assuming such an outcome, GBP 
might track higher, with EUR/GBP testing 0.8230/35 support." 
    By 0848 GMT, sterling was trading around 0.2 percent down on the day, but at 
82.69 pence was within striking distance of the previous day's one-year highs. 
    The euro also recovered 0.24 percent from a one-month low against the dollar 
to trade at $1.3609   .      
    The common currency is likely to stay under pressure in the lead up to the 
European Central Bank policy meeting later on Thursday and could fall further if 
the ECB highlights the risk of disinflation, some traders said.     
    But with the bank not seen delivering any swift easing of policy, currency 
strategist at Societe Generale strategist Kit Juckes said those betting on a 
further fall for the euro were likely to be disappointed.  
    "The ECB ought to have rates at -2 percent ... but no one thinks the ECB 
will do anything," he said. "$1.38 is more likely than $1.34 on a 1-month view." 
         
    FED THOUGHTS 
    The dollar index    was slightly lower on the day at 80.931. It rose as 
far as 81.166 on Wednesday, a high not seen since late November, after the 
weekly ADP report showed private employers added a bigger-than-expected 238,000 
jobs in December, the strongest increase in 13 months.    
    That lifted expectations that non-farm payrolls on Friday would surprise on 
the upside and pushed 2-year Treasury yields to a four-month high of 43 basis 
points   .  
    "The ADP numbers were quite strong, and if the payrolls report surprises on 
the upside too, that would help push up the dollar," said Ayako Sera, senior 
market economist at Sumitomo Mitsui Trust Bank. 
    Minutes from the Federal Reserve's Dec. 17-18 meeting showed the central 
bank wanted to err on the side of caution even as it began to scale back its 
bond-buying stimulus.    
    But market participants have begun to price in tighter policy sooner rather 
than later, with the tapering process expected to be completed by the end of 
this year. 
 
 (editing by Elizabeth Piper) 
 ((lisa.twaronite@thomsonreuters.com)(+81 3 6441 1870)(Reuters Messaging: 
lisa.twaronite.thomsonreuters.com@reuters.net)) 
  
((Euro/dlr          1.3613   1.3574   +0.29    +3.18   1.3194 
 Dlr/yen           105.02   104.83   +0.18   +21.07    86.74                 
 Euro/yen       142.94   142.34   +0.42   +24.89   114.45                 
 Dlr/swiss         0.9084   0.9108   -0.26    -0.78   0.9155                 
 Stg/dlr           1.6458   1.6447   +0.07    +1.27   1.6251                 
 Dlr/cad           1.0835   1.0818   +0.16    +9.21   0.9921                 
 Aus/dlr           0.8878   0.8901   -0.26   -14.58   1.0393                 
 NZD/Dlr           0.8263   0.8264   -0.01    -0.24   0.8283                 
 Euro/swiss     1.2365   1.2370   -0.04    +2.40   1.2075                 
 Euro/stg       0.8269   0.8252   +0.21    +1.91   0.8114                 
 Euro/sek       8.9284   8.9235   +0.05    +4.09   8.5777             
 Dlr/Nok           6.1818   6.2020   -0.33   +11.12   5.5630    )) 
 
Keywords: MARKETS FOREX/