LONDON, Jan 29 Reuters The dollar was steady on Monday as investors took stock of U.S. economic data ahead of the Federal Reserve policy meeting this week, while the euro edged lower as ratesetters weighed in on the timing of interest rate cuts.

The dollar index , which measures the U.S. currency against six rivals, was up less than 0.1 at 103.61 on Monday and remained close to the sixweek high of 103.82 it touched last week. The index is set for a 2 gain in January as traders temper expectations of early and deep U.S. interest rate cuts.

The Fed in December surprised markets by taking a dovish tilt, resulting in traders pricing in aggressive easing, with a cut expected as early as March.

But since then, strong economic data and pushback from central bankers have prompted traders to adjust expectations. Markets are currently pricing in a 49 chance of a rate cut in March, the CME FedWatch tool showed, compared with an 86 chance at the end of December.

Speculation about the nearterm path for interest rates continues to be the dominant factor driving financial market moves, said Lloyds Bank economist Nikesh Sawjani.

The Fed currently faces a U.S. economic picture that sees economic activity still holding up better than expected even though inflation measures continue to move down. That hardly suggests that the economy urgently needs rate cuts.

Data on Friday showed U.S. prices rose moderately in December, keeping the annual increase in inflation below 3 for a third…