FOREX-Dollar steady ahead of Fed meeting; low chances of June rate cut

(Recasts; adds analyst quote; updates prices)
By Kate Duguid
NEW YORK, June 17 (Reuters) - The U.S. dollar was roughly
unchanged on Monday, hovering near the two-week high set earlier
in the session as investors reconsidered how dovish the Federal
Reserve is likely to be at this week's policy meeting.
Broader currency markets were quiet, as traders hesitated to
put on large positions before the Fed's two-day meeting, a
meeting of European Central Bank policymakers in Portugal and
the Bank of England's interest rate decision on Thursday.
"It wouldn't surprise us to see a bit of volatility going
into these meeting but ultimately you're going to see people
taking more of a wait-and see approach," said Charles Tomes,
portfolio manager at Manulife Asset Management.
Expectations of a rate cut at the Fed's June 18-19 meeting
have fallen to a probability of 20.8%, according to CME Group's
FedWatch tool. But bets for monetary easing at its July meeting
remain elevated, with markets pricing in a 67.9% chance of a 25
basis point cut.
Slow jobs growth in May, dovish comments from Federal Open
Market Committee members and a slate of weak inflation data last
week pushed rate-hike expectations up.
"It's probably warranted that you need somewhat of a rate
cut priced in. We think the pendulum has swung a little too far,
too fast in the short term where the market has gotten ahead of
itself pricing in cuts," said Tomes.
The dollar index hit a two-week high of 97.603 .DXY on
Monday but was last flat on the day at 97.573. The euro was
0.07% higher at $1.122 EUR= as investors awaited policymakers
speeches at the European Central Bank meeting in Sintra,
Portugal, and Tuesday's euro zone inflation data.
Against the yen, the dollar was slightly stronger, last up
0.06% to 108.62 JPY= .
Sterling slid as low as $1.254 GBP= , its weakest since
January, heading for a 2019 low. Investors worry Boris Johnson,
the front-runner to replace Prime Minister Theresa May, could
put Britain on a path towards a no-deal Brexit.
The Bank of England on Thursday will consider tightening
monetary policy. Although BoE chief economist Andy Haldane has
said the central bank is nearing a time for the UK to raise
rates, no major changes should be expected until Brexit
negotiations have finished, said Stephen Gallo, European head of
foreign exchange strategy at BMO Capital Markets.
"We expect the (Monetary Policy Committee) to retain it's
tightening bias to some degree, though we wouldn't rule out a
few modest tweaks to acknowledge the worsening global backdrop
and weak economic conditions in the euro zone."