FOREX-Euro falls to one-week low as easing expectations favour dollar

* Euro one of worst performing currencies this week
* Sterling slips to new 27-month low vs dollar
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds quotes, context, updates prices)
By Olga Cotaga
LONDON, July 17 (Reuters) - The euro fell to a one-week low
against the dollar on Wednesday and towards the lower end of
this year's trading range, weighed down by expectations of
monetary policy easing and investors' preference for the
higher-yielding U.S. currency.
Analysts say it is unlikely the euro will recover
significantly before a European Central Bank meeting next week
at which policymakers might unveil plans for fresh monetary
stimulus.
Nearly two interest rate cuts of 10 basis points are priced
in by money markets for 2019. A worse-than-expected ZEW survey
of German economic sentiment on Tuesday put further pressure on
the struggling euro, one of the worst-performing currencies this
week along with sterling.
The common currency was unchanged at $1.1214 EUR=EBS even
after euro zone consumer price inflation was revised up to 1.3%
year-on-year in June and construction output showed a small
contraction in May.
Before the data release, board member Benoit Coeure said the
ECB was ready to act if necessary to help inflation in the euro
zone move towards its aim of close to but below 2%. The currency dropped earlier to $1.1200, the lowest since
July 9. It has fallen by 2.2% so far this year against the
dollar and traded within a relatively narrow range of $1.15 and
$1.11.
As the ECB meeting on July 25 approaches, the euro is likely
to continue trading around current levels and possibly below
$1.12, said Kenneth Broux, head of corporate research at Societe
Generale.
Europe is underperforming and "I would favour long dollar in
this environment," he said.
Corporates and other market participants do not look overly
concerned about big fluctuations in the euro, as the cost of
protection against major price swings measured by the one-month
options contracts is relatively low.
Meanwhile, hedge funds topped up their net short positions
on the euro to $5.02 billion in the week to July 9 while staying
neutral on the dollar, according to Commodity Futures Trading
Commission.
Euro short positions increased only slightly, however, and
remain close to their lowest since January.
Elsewhere, the pound slipped to another 27-month low of
$1.2382 GBP=D3 on a combination of no-deal Brexit jitters and
a stronger dollar. It also hit a fresh six-month low against the
euro at 90.51 pence EURGBP=D3 . GBP/
The dollar rose on Tuesday after stronger-than-expected June
U.S. retail sales data dampened expectations that the Fed could
cut interest rates by 50 basis points rather than 25 bps at its
month-end policy review.
An index which tracks the dollar against a basket of
currencies .DXY surged to a one-week high of 97.44, but it was
last down marginally at 97.309.
Some analysts doubt the dollar's robust performance is
sustainable.
"The upside for the dollar we view as generally limited from
here with the Fed still very likely to deliver two rate cuts
through the remainder of the year," said Derek Halpenny,
European head of research at MUFG.

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