* Euro broadly steadier after Monday's bounce from 21-month
* Inches down on support for early Italian election
* Focus now on ECB meeting on Thursday
* Graphic: World FX rates in 2016 tmsnrt.rs/2egbfVh
(Updates after start of European trading)
By Patrick Graham
LONDON, Dec 6 The euro retreated from a 3-week
high on Tuesday while bets on market volatility stayed close to
their highest since June's Brexit vote ahead of this week's
European Central Bank meeting on its quantitative easing
The Australian dollar was the morning's biggest loser,
dipping as much as 0.4 percent after the Reserve Bank kept
interest rates on hold but sounded a note of caution on the pace
Other major currency pairs traded in a tight range after a
rollercoaster ride following Sunday's Italian constitutional
referendum 'No' vote, which saw the euro dip to a 21-month low
before rebounding more than 1.5 percent.
The biggest rise in German industrial orders for more than
two years in October prodded the single currency higher
before a report on the possibility of Italian elections as soon
as February unnerved investors.
It was down just 0.2 percent at $1.0743 by 1235 GMT.
"Really eyes are moving to the ECB and we think the
governing council will struggle to exceed the relatively dovish
expectations being priced into the market," said Valentin
Marinov, head of G10 FX strategy with Credit Agricole in London.
The dollar's inability to push on past $1.05 per euro after
the Italian vote encouraged those in the market calling for a
broader halt to the greenback rally the followed Donald Trump's
U.S. election win.
"I have a really hard time staying bullish on the dollar
even though we have Italian government uncertainty on top of it
all," Indosuez's Geneva-based head of FX and precious metals
trading, Davis Hall, said.
"The range is probably still $1.0850 to $1.0250."
One-week implied volatility has retreated from
highs of almost 18 percent reached before Italy's vote, but at
13 percent is still almost double recent months' normal levels.
ECB chief Mario Draghi is expected to lay out his plans for
quantitative easing after next March at a news conference on
At least a six-month extension of the programme is now
expected but many bank and fund analysts speculate that the bank
might announce some sort of reduction or tapering of the monthly
bond-buying amounts as part of that move.
Any such change in the direction of the ECB's policymaking
would broadly be seen as a euro positive after almost two years
London's City Index Direct chief analyst, Kathleen Brooks,
said the euro remained in a strong position within the G10 FX
space, even after the Italian vote.
"As Italy's banking sector can scrape together some foreign
investment, mixed with a sweetened nationalised deal for Monte
dei Paschi, then we can't see how Italy's political woes can
have anything other than a temporary impact," Brooks said.
(Editing by Louise Ireland and Richard Lough)