FOREX-Dollar holds at two-month high, Brexit kicks pound to 28-mth low

* Fed expected to cut interest rates 25 bps this week
* Sterling hits 28-month low on no-deal Brexit worries
* GRAPHIC: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Updates prices; adds analyst quotes)
By Kate Duguid
NEW YORK, July 29 (Reuters) - The dollar held near a
two-month high on Monday ahead of what is expected to be the
first U.S. interest rate cut since the financial crisis, while
the rising risk that Britain will exit the European Union
without a deal knocked the pound to a 28-month low.
The Federal Reserve is forecast to cut interest rates on
Wednesday by 25 basis points. The move would be a so-called
insurance cut to protect the U.S. economy from global
uncertainties and trade pressures, in contrast to cuts by
countries facing more imminent risks.
The dollar index .DXY was up 0.02% in afternoon trade at
98.027. Better-than-expected U.S. GDP data published on Friday
had buoyed the index against rivals; the greenback retained
those gains on Monday, hitting a fresh two-month top. But some
of that move was retraced as traders refrained from placing big
bets ahead of the Fed decision.
"It is quiet as the market is waiting for the Fed. The
dollar is generally well-supported. It seems like the market is
expecting the Fed to struggle to be very dovish relative to
expectations," said Daniel Katzive, head of foreign exchange
strategy for North America at BNP Paribas.
Despite Friday's strong economic growth figures, "the
markets are still pricing in very dovish guidance, with about 75
basis points in rate cuts projected this year. Hence, there
could be sore disappointment if the Fed doesn't fully deliver,"
wrote analysts at Action Economics.
"This could, with the ECB gearing up for a rate cut in
September, keep the dollar underpinned, and maintain EUR-USD's
downward directional bias."
The euro was modestly higher at $1.115 EUR= after hitting
Thursday's bottom of $1.110, its lowest since May 2017.
Also on Monday, the British pound GBP= fell more than 1%
to a 28-month low as investors scrambled to factor in the
growing risk of a no-deal Brexit and the chance that new British
Prime Minister Boris Johnson will call an early election.
"It's pretty clear the market is getting more concerned
about a no-deal Brexit after the weekend press," said Katzive.
"And that's starting to generate the kind of volatility that a
lot of people thought was maybe overdue."

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GRAPHIC: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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