* Investors expect ECB to signal significant easing
* Euro heads towards $1.11; Swiss franc stuck near 2-year
high
* Sterling above two-year lows ahead of Johnson speech
* Dollar reacts little to Mueller testimony
(New throughout, updates prices, market activity, comments; new
byline, changes dateline, previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, July 24 (Reuters) - The euro fell to a two-month
low against the dollar on Wednesday, hit by weak economic data
that bolstered speculation the European Central Bank could
undertake aggressive monetary policy easing as soon as this
week.
The dollar was modestly lower against a basket of currencies
after three straight days of gains, generally trading in narrow
ranges ahead of monetary policy meetings at the ECB on Thursday
and the Federal Reserve next week.
The greenback showed little reaction to the testimony of
former U.S. Special Counsel Robert Mueller, who said he had not
cleared President Donald Trump of obstruction of justice.
Financial markets are focused on the ECB and Fed policy
meetings. Money markets are pricing in a 54% chance of a
10-basis-point cut at Thursday's ECB meeting.
The probability rose after the eurozone purchasing managers'
index unexpectedly fell to a three-month low of 51.5 in July
from 52.2 in June. Economists polled by Reuters had expected a
slight decline to 52.1. The 50 mark separates economic growth from contraction.
The ECB could also signal further reductions down the road
or a fresh round of quantitative easing (QE), investors said.
"We think the ECB will keep rates on hold tomorrow, but will
adjust its forward guidance, paving the way for a 10 basis-point
cut in September," said Ned Rumpeltin, European head of FX
strategy, at TD Securities in London.
"Our base case looks for a dovish message overall but
nothing further to be delivered at this stage. A significant
dovish shift tomorrow could still push (the euro) lower into a
new trading range below $1.11," he added.
In mid-morning trading, the euro was down slightly at
$1.1146 <EUR= after earlier hitting $1.1128, its lowest since
May 30. The euro hit a two-year low of $1.1106 in May.
Markets betting on ECB easing have lifted the Swiss franc
EURCHF= , with the euro slipping 0.1% to 1.0974 francs, not far
from the two-year high of 1.0972 reached on Tuesday.
The euro has shed 2% of its value this month as investors
priced in the probability of euro zone borrowing costs falling
deeper into negative territory.
The dollar was 0.2% lower against the yen at 108.05 yen
JPY= . Against a basket of currencies, the greenback was down
0.1%.
The dollar gained the previous day after Washington reached
a deal to lift government borrowing limits, which analysts said
could limit the Fed's appetite for rate cuts.
The pound rose slightly from recent lows after Boris Johnson
on Tuesday won the contest to be Britain's next prime minister,
focusing investor attention on the prospect of a no-deal Brexit.
Sterling was last up 0.3% at $1.2490 GBP=D3 , not far from
the 27-month low of $1.2382 it hit last week. It rallied 0.5%
versus the euro, which dropped to 89.23 pence EURGBP=D3 .
========================================================
Currency bid prices at 9:39 AM (1339 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1147 $1.1151 -0.04% -2.81% +1.1158 +1.1128
Dollar/Yen JPY= 108.0400 108.2100 -0.16% -2.01% +108.2700 +108.0000
Euro/Yen EURJPY= 120.45 120.67 -0.18% -4.57% +120.7100 +120.2200
Dollar/Swiss CHF= 0.9847 0.9851 -0.04% +0.34% +0.9874 +0.9843
Sterling/Dollar GBP= 1.2481 1.2436 +0.36% -2.16% +1.2522 +1.2428
Dollar/Canadian CAD= 1.3130 1.3132 -0.02% -3.72% +1.3147 +1.3124
Australian/Doll AUD= 0.6984 0.7004 -0.29% -0.92% +0.7008 +0.6973
ar
Euro/Swiss EURCHF= 1.0978 1.0985 -0.06% -2.45% +1.1005 +1.0974
Euro/Sterling EURGBP= 0.8929 0.8962 -0.37% -0.61% +0.8968 +0.8907
NZ NZD= 0.6709 0.6702 +0.10% -0.12% +0.6714 +0.6692
Dollar/Dollar
Dollar/Norway NOK= 8.6330 8.6757 -0.49% -0.07% +8.6929 +8.6342
Euro/Norway EURNOK= 9.6248 9.6780 -0.55% -2.84% +9.6874 +9.6260
Dollar/Sweden SEK= 9.4372 9.4679 -0.35% +5.28% +9.4870 +9.4330
Euro/Sweden EURSEK= 10.5206 10.5573 -0.35% +2.50% +10.5743 +10.5220