FOREX-Euro near $1.12 as investors wait for central bank meetings

* Big week for policy meetings begins with ECB
* Dollar up vs euro on safe-haven demand
* Swiss franc reaches two-year high, pulls back
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, July 22 (Reuters) - Foreign-exchange markets started
the week waiting to see how much and how fast policymakers might
ease policy, beginning with the European Central Bank on
Thursday.
The euro weakened to $1.12 in Asian trading as the dollar
gained on safe-haven demand amid rising tensions in the Middle
East.
Positioning data published last week showed that investors
remain net long of dollars, unchanged from the previous week.
Foreign exchange has been stuck in trading ranges in recent
weeks, with expectations for easing by both the Federal Reserve
and the ECB more or less cancelling out the impact on the euro
and the dollar.
Pricing for a 50-basis-point Fed cut soared last week after
a dovish speech by New York Fed President John Williams. Those
expectations later dwindled after a Fed spokesman clarified that
the remarks did not refer to "potential policy actions".
Priced-in forecasts for a 50-basis-point cut have dropped
from as high as 71% last week to 18.5% on Monday. FEDWATCH
The Fed holds its monetary policy meeting next week, as does
the Bank of Japan.
"FX markets don't tend to get too excited about monetary
policy when it's all nuance and forward guidance, but when
central banks are making actual rate moves and QE adjustments,
monetary policy becomes the driving theme," BMO Capital Markets
strategist Stephen Gallo said.
The euro nudged lower to $1.1217 EUR=EBS after earlier
reaching $1.1208 in Asian trading. The dollar index rose 0.1%
to 97.199 .DXY .
Analysts said the dollar was benefiting from a confrontation
in the Strait of Hormuz, the oil trade's most important
waterway. Footage showed the Iranian military defying a British
warship to seize a tanker on Friday. The dollar rose 0.2% against the yen to 107.91 JPY=EBS
after earlier breaching the 108 level.
The Swiss franc pulled back after rising to another two-year
high against the euro. By 0730 GMT, it had shed 0.1% to 1.1023
EURCHF=EBS after earlier plumbing 1.1013 francs per euro.
Sterling dipped below $1.25, losing 0.2% to $1.2483 GBP=D3
as investors waited to see whether Boris Johnson would win the
Conservative party leadership contest, as expected.
"We're likely to be marking time ahead of those big risk
events later in the week," National Australia Bank FX Strategist
Rodrigo Catril said. "The market is still licking its wounds
post Fed Williams' backtracking."