FOREX-ECB expectations weigh on euro despite lack of rate move
* Euro down, ECB hold on rates gives only brief support
* Aussie bolstered by upbeat retail sales data
* Yen holds steady after recent rally
* Eyes on ECB news conference, U.S. jobs numbers
LONDON, Feb 6 (Reuters) - The euro traded a touch lower on Thursday as markets positioned for a dovish statement from the European Central Bank in response to a fall in inflation that has raised questions about the euro zone's economic recovery.
The single currency recovered briefly after the bank's formal decision on interest rates spurned some outside bets that it would trim already ultra-low borrowing costs as part of efforts to get prices across the euro zone rising.
But that did not quell speculation that President Mario Draghi could unveil technical moves to bolster banking liquidity at an afternoon news conference or, failing that, deliver a strong declaration of the bank's intent to support recovery.
"There was a lot of tension ahead of the decision and I think the market is convinced that in the absence of any change in rates there may be something more juicy to come at the press conference," said Stephen Gallo, strategist with BMO in London.
"We have tested levels below 1.35 and I think that leaves the market ready to make a break lower depending on what Draghi says."
Among other options, the bank could add to the amount of euros effectively in circulation by backing away from its regular sterilisation of the money it has spent on sovereign bonds.
Inflation fell to just 0.7 percent last month and retail sales numbers on Wednesday were disappointing but recent business sentiment surveys have been more positive, offering the bank some room to manoeuvre on policy.
Most analysts are convinced the ECB will have to take some form of action to support growth in the next few months, however, and that has left many downbeat about the euro's prospects against the dollar this year.
"In this kind of situation whether Draghi makes a strong statement of readiness to take further action and actually acts on liquidity may just be a coin toss," Gallo said.
In an otherwise quiet session on global currency markets, Australia's dollar added to gains which have seen it jump more than 2 percent this week after the Reserve Bank dropped its bias towards lower interest rates and toned down a long-term call for the currency to weaken.
That put a halt to a months-long slide in the Aussie due to worries over Australia's economic prospects in the face of lower commodities prices and a slowdown in China and some traders reported a handful of banks going long on the Aussie against the euro ahead of the ECB decision.
"The positive macro story in Australia is starting to build," said Phyllis Papadavid, strategist with BNP Paribas in London. "We have been positive on the Aussie for some time and have gone long against the (New Zealand) kiwi."
The euro was down just over 0.2 percent on the day at $1.3503, above a two-month low near $1.3477 that had been set on Monday.
So far this week, the dollar is down around 0.5 percent against the yen, with the Japanese currency benefiting from its role as a safe haven in the recent selloff of emerging market equities and currencies. The emerging sector was mostly higher on Thursday and the dollar stable against the yen.
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..