* 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
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." 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.