(Corrects weaken to gain in sixth paragraph)
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Saikat Chatterjee
LONDON, June 28 (Reuters) - The euro stabilised on Friday
but was on track for its biggest monthly gain in 17 months as
traders questioned how much firepower the European Central Bank
could potentially roll out to support a struggling economy and
boost inflation.
June data at 1000 GMT is expected to show monthly euro zone
inflation of 1.2% -- well short of the ECB's target of just
under 2%. Policymakers have promised more stimulus if needed but
some investors are sceptical.
"The elbow-room for the ECB to ease policy is far more
limited than the (U.S.) Fed and that is weighing on the euro,"
said Esther Reichelt, FX strategist at Commerzbank.
While inflation expectations in the United States and Europe
have declined in recent weeks, as measured by forward-starting
swaps, U.S. gauges have stabilised after the Federal Reserve
opened the door to rate cuts last week.
In comparison, policy interest rates in Europe are already
in negative territory and Europe's most widely watched measure
of inflation expectations -- the five-year, five-year forward
rate -- has started declining again.
Against the dollar, the single currency EUR=EBS edged 0.1
percent higher at $1.1384. On a monthly basis, the single
currency was set to gain 1.6%.
The dollar index .DXY , which measures the U.S. currency
against six of its peers, was at 96.217, unchanged on the week.
Markets are also hoping that a meeting between U.S.
President Donald Trump and Chinese President Xi Jinping at the
G20 in the Japanese city of Osaka will bring progress on trade.
Negotiations between the world's two largest economies have
been fraught, however, and traders and analysts caution that a
resolution at the G20 summit is far from certain.
Trump will meet Xi at 11:30 a.m. (0230 GMT) on Saturday.
The dollar traded at 107.66 yen JPY=EBS , little changed on
the day but on course for a 0.3% gain this week as the greenback
mounted a recovery from a five-month low of 106.77 yen reached
on Tuesday.