FOREX-Mounting U.S. rate cut bets cap dollar before G20 meeting

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, June 11 (Reuters) - The dollar steadied above a
recent two-and-a-half-month low on Tuesday as investors focused
on a Group of 20 summit later this month where Beijing and
Washington might make some progress on trade talks.
A 3.5% rally in the dollar against its rivals in the first
five months of 2019 has come to a halt in recent weeks as
dovish comments from Federal Reserve officials and weak economic
data bolster rate-cut expectations.
Though markets are only pricing in about a 20% chance of a
rate cut in June, they are fully pricing in a cut by July, and
more than three rate hikes by mid-2020. The next policy meeting
is scheduled for next week.
Rising rate cut bets have also prompted investors to
increase holdings of other currencies, with latest positioning
data showing the biggest weekly rise in euro positions in nine
months.
With the dollar having weakened 1% this month .DXY against
a basket of other major currencies to hit a late-March low of
96.46 last week, investors are firmly focused on a G20 meeting
in Osaka, Japan, on June 28-29.
The dollar was broadly steady at 96.80 on Tuesday.
"That meeting is now becoming the centerpiece for financial
markets in the coming days," said Simon Derrick, a currency
strategist at BNY Mellon in London.
U.S. President Donald Trump said on Monday he was ready to
impose more tariffs if talks at the summit with China's
president, Xi Jinping, make no progress. Trump said last week he would decide after the meeting of
the leaders of the world's largest economies whether to carry
out a threat to impose tariffs on at least $300 billion in
Chinese goods.
Away from the upcoming G20 summit, investors have become
more cautious of betting on further dollar weakness.
"Bets of U.S. rate cuts have been rising quickly in recent
days and we think the pricing has become too aggressive so the
dollar's downside is limited," said Manuel Oliveri, a currency
strategist at Credit Agricole in London.
The euro EUR=EBS was a touch firmer at $1.1318 though a
survey showed investor morale in the euro zone deteriorated
sharply in June, falling well short of expectations. the pound was lower as a leadership contest for
the ruling Conservative Party got underway this week. The euro
edged to a five-month high against the pound EURGBP=D3 to
89.32 pence before British employment data.
Recent data, particularly manufacturing figures, have been
weak, fuelling expectations that the next move from the Bank of
England will be a rate cut. Policymakers, however, have adopted
an unexpectedly hawkish stance.
The Bank of England will probably need to raise interest
rates sooner than financial markets expect, policymaker Michael
Saunders said on Monday. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EUR positions https://tmsnrt.rs/2R1uXE2
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