FOREX-Euro struggles ahead of Fed meeting

* Euro floats around last week's 26-month low vs dollar
* British pound remains the biggest mover in fx
* Yen gains vs dollar after BoJ meeting
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Olga Cotaga
LONDON, July 30 (Reuters) - The euro hovered on Tuesday
around the 26-month low it reached last week against the dollar
as investors awaited to see whether the Federal Reserve would
signal the start of an interest rate-cutting cycle.
Although the Fed is expected to lower rates in the United
States when its two-day policy meeting ends on Wednesday, U.S.
yields will remain above those in the euro zone, making the
dollar a more attractive investment for yield-seeking traders,
analysts say.
Money markets are convinced the central bank will cut the
key benchmark rate by 25 basis points to between 2% and 2.25% on
Wednesday, but it remains to be seen whether this is going to be
a one-off cut or whether more cuts will follow.
Analysts from Bank of America Merrill Lynch expect the Fed
to guide on Wednesday towards more "insurance cuts" in the
coming meetings, which essentially means taking preventive
measures by cutting rates "in the face of high uncertainties and
a cloudy outlook," they said in a note to clients.
Nearly three cuts are priced in the money markets by the end
of this year.
The euro was flat at $1.1144 EUR=EBS , unmoved by lower
regional German inflation data and weaker euro area economic
sentiment gauges, but not far from the low of $1.1101 it reached
last week.
The consumer price index declined across most key regions in
Germany in July. Traders are waiting for the preliminary
harmonized German inflation data at 1200 GMT, which according to
the economists polled by Reuters could show a fall in inflation
to 1.5% in July from 1.6% in June, on a year by year basis.
So far this month, the common currency has shed nearly 2%
against the greenback. Building expectations that the European
Central Bank may turn out to be more aggressive than the Fed in
easing monetary policy contributed to euro falls.
The pound was the biggest mover in the foreign exchange
market, plunging to a new 28-month low of $1.2120 GBP=D3 in
Asian trading on growing concerns that Britain could crash out
of the European Union without a transition agreement on Oct. 31.
Sterling was last down 0.3% at $1.2183. It was also weaker
against the euro by 0.4% at 91.52 pence, having touched earlier
a two-year low of 91.88 pence.
The Japanese yen was last up by 0.2% at 108.55 yen per
dollar JPY=EBS versus the dollar after the Bank of Japan as
expected maintained on Tuesday a pledge to keep short-term
interest rates at a negative 0.1% via aggressive bond purchases.
The BoJ also said it would ramp up stimulus "without
hesitation" if needed, but traders have repeatedly said that
compared with other major central banks the BoJ has limited
options left. Elsewhere, the Australian dollar reached a six-week high of
$0.6887 AUD=D3 against the U.S. dollar, but otherwise the rest
of the forex market was relatively quiet.
The Swiss franc has stabilised after its recent run to
two-year highs and was last up 0.1% at 1.1038 versus the euro
EURCHF=EBS .