LONDON: The euro tip-toed away from a seven-week low on Wednesday as talk of extending the lifespan of the US Federal Reserve's stimulus helped balance expectations of easing by the ECB in coming months. With uncertainty high about what steps the European Central Bank might signal at its policy meeting on Thursday, investors were left weighing a fresh batch of data that included euro zone services PMIs, with German output figures also due later. The services report pointed to a continuing gradual recovery in the 17-country euro zone but one that remains painfully slow in many parts of the bloc. European shares had already inched to a new five-year high by the time the data came out, helped by a batch of better-than-expected results, including from world No. 1 jobs agency Adecco, which flagged increasing demand in Europe. Expectations of a dovish turn by the ECB kept the euro on the defensive, though it was holding steady at $1.3500 in early trading from $1.3469 overnight. Dealers reported talk of buying by a Swiss bank, perhaps covering a short position ahead of the ECB meeting. "For the next couple of days we have such a heavy events schedule, with the ECB tomorrow and then U.S. payrolls on Friday, that I think we are looking at the market battening down the hatches," said Ned Rumpeltin, head of G10 FX strategy at Standard Chartered. The dollar, meanwhile, pared its recent gains against a basket of major currencies and dipped 0.2 percent, even while it edged up on the Japanese yen to 98.64. Comments from Fed policymaker John Williams who said the central bank should wait for stronger evidence of growth momentum before trimming bond-buying helped balance out a surprisingly strong U.S. service sector report. There was also strong interest in a couple of research papers from top Fed officials suggesting there was scope for the central bank to provide even more stimulus to the economy and more relaxed thresholds for when to raise rates. Jan Hatzius, chief economist at Goldman Sachs, felt the papers were important enough to alter his outlook for policy. "The studies suggest that some of the most senior Fed staffers see strong arguments for a significantly greater amount of monetary stimulus," he wrote in a note to clients. "Our central case is now that the FOMC will reduce the threshold from 6.5 percent to 6 percent at the March Open Market Committee meeting." BONDS NUDGE UP That helped Treasury prices and trimmed yields on 10-year notes by 15 basis points to 2.6476 percent, while German Bunds matched the moves in Europe. Asian markets for the most part had moved sideways in face of the uncertainty over U.S. and European monetary policy, though Japanese stocks managed to buck the trend thanks to gains in major car makers. Excitement was otherwise sorely lacking, with MSCI's index of Asia-Pacific shares outside Japan barely moved. Australia's main index was all but flat, while shares in Shanghai dipped. Investors mostly took their cue from Wall Street, which ended lower on Tuesday after the Institute for Supply Management's October read on U.S. services came in at a surprisingly strong 55.4. While evidence of economic resilience was welcome, it also adds to the case for the Fed to wind back its bond buying programme. Most analysts still favour March as the window for a move, but a shift in December is a growing risk. New Zealand also added to the run of better global economic news as employment jumped well past forecasts. It prompted investors to bring forward rate hike expectations. The country's dollar climbed a third of a U.S. cent to $0.8386.

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