LONDON (AFX) - The euro remained steady against the dollar in quiet early trade ahead of the European Commission's confidence survey later this morning, dealers said. The euro zone sentiment index for January, due at 11 am, is expected to show a slight improvement to 98.9 from 98.8, providing further evidence that the euro zone economy may be on the mend following last Friday's PMI data. Rob Hayward, currency strategist at ABN Amro, thinks the dollar may be a little "over-extended" as most of the good news has been factored in. He thinks the risks are on euro/dollar breaking through its 0.8560-0.8660 trading range on the upside, especially as many of the euro long positions held by speculative accounts have diminished. Economists generally think that last week's raft of US data on balance provided evidence that the US economy is turning the corner. "At the moment, everything we see is consistent with a gradual grind out of the doldrums, with the profile of recovery best described as an elongated-U, bowl-shaped return," said Steve Barrow, currency economist at Bear Stearns. Merrill Lynch's senior currency strategist Neil Mackinnon thinks that investors will continue to prefer the dollar over the euro, though he concedes that the dollar is unlikely to make the same headway it has over recent weeks. The focus this week, he said, will be how the European Central Bank and the Bank of England respond to last week's decision by the Federal Reserve to hold rates. Both are expected to keep rates on hold. Dollar/yen was also rangebound with market participants unlikely to take major positions ahead of this weekend's G7 summit. "The market is looking to see if there is any reference to the yen in the communique," said Mackinnon. "If there isn't they may want to push dollar/yen higher." Meanwhile sterling was relatively subdued, though WestLB currency strategist Michael Klawitter noted that the risks to euro/sterling are to the downside as speculative accounts have increased their sterling short positions to the highest level since June 2001.