FOREX-Dollar reaches two-week high as investors prepare for Fed meeting

* Strong data last week support dollar
* Euro struggles near $1.12
* Sterling heads towards January low
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, June 17 (Reuters) - The U.S. dollar rose to a
two-week high on Monday after strong economic data last week led
investors to reassess whether the Federal Reserve will sound as
dovish as expected at this week's monetary policy meeting.
Broader currency markets were quiet, as traders hesitated to
put on large positions before the Fed meeting, a meeting of
European Central Bank policymakers in Portugal and the Bank of
England's interest rate decision on Thursday.
Strong U.S. retail sales on Friday reduced the chances of a
rate cut this week and lifted the dollar, although Fed Chairman
Jerome Powell is expected to leave open the possibility of
future rate cuts.
Positioning data point to a scaling back of investors'
dollar long positions, although only to levels seen in March.
Expectations of an rate cut at the Fed's June 18-19 meeting
fell from 28.3% on Thursday to 21.7% after the retail data,
according to CME Group's FedWatch tool. However, bets for
monetary easing at the July meeting remain at 85%.
Analysts see plenty of hurdles for the euro, too.
"Despite what should be a softer dollar environment this
summer, there are enough EUR negatives out there (ECB easing,
trade wars, Italy & Brexit to name a few) to prevent EUR/USD
breaking out of a $1.10-$1.15 range this year," ING analysts
said in a note.
The dollar index, which measures it against a basket of
currencies, stood unchanged at 97.569 .DXY , near a two-week
high reached earlier in the session. The euro was little changed
at $1.1209 EUR=EBS .
Fears a protracted Sino-U.S. standoff could tip the global
economy into recession have prompted rate cuts in India,
Philippines, Malaysia, New Zealand and Australia.
The ECB also has raised the prospect of more stimulus, and
the Bank of Japan is widely expected to reinforce its commitment
to maintain its stimulus for a while yet.
Although markets are pricing in a Fed rate cut in July,
analysts say much will depend on U.S.-China talks to resolve a
conflict over trade.
"Markets are pricing a high probability of a July cut,
despite there being unusually high uncertainty, particularly
around trade. We find it hard to believe that the Fed would cut
rates if post-G20, for example, there were a de-escalation of
tensions with China (eg simply a resumption of talks)," said RBC
strategist Elsa Lignos.
The dollar was flat at 108.60 yen JPY= after edging up
0.15% on Friday.
Sterling slid further towards a 2019 low, touching $1.2575
GBP=D3 , its weakest since January. Investors worry Boris
Johnson, the frontrunner to replace Prime Minister Theresa May,
could put Britain on a path towards a no-deal Brexit.