* Pound slump erases election day bounce
* Dairy price drop knocks kiwi, rate cut expectations hit
Aussie
* Dollar grinds higher
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tom Westbrook
SYDNEY, Dec 18 (Reuters) - The pound extended its slide on
Wednesday, as Britain's fixing of a fresh Brexit deadline
rekindled fears of a chaotic exit from the European Union, while
the dollar won back lost ground.
Sterling has collapsed more than 3% since it peaked at an
18-month high of $1.3516 after Prime Minister Boris Johnson's
landslide electoral victory last week.
His government, which campaigned to "get Brexit done," on
Tuesday set the end of 2020 as an immovable deadline.
"With the level of frothiness in positioning, I think people
had priced in very smooth sailing throughout 2020," said Chris
Weston, head of research at Melbourne brokerage Pepperstone.
"This has given us a snap back to reality. If you thought
Brexit was solved, and we're going to see very, very smooth
times ahead, then that's not quite going to be the case."
Sterling GBP= last traded at $1.3102, below where it sat
before polling day and 0.2% lower for the session.
Asked if the government would legislate to rule out any
extension of the transition beyond 2020, one of Johnson's most
senior ministers, Michael Gove, said: "Exactly, absolutely."
In Brussels, officials said the timetable was "rigid" and
likely to limit the scope of any deal.
Against the euro, the pound hit a two-week low of 85.17
pence per euro EURGBP=D3 . The currency approaches another
hurdle with inflation data due at 0930 GMT.
Focus will also be on German business sentiment data due
later on Wednesday, along with a speech from European Central
Bank chief Christine Lagarde at 0830 GMT and remarks from U.S.
Federal Reserve Chicago President Charles Evans at 1740 GMT.
SPILT MILK
Sterling's slide supported the dollar to its highest in a
week against a basket of currencies .DXY at 97.320.
Elsewhere, moves were slight as trading slows down into the
holiday season and as the currency market waits for details on
the Sino-U.S. trade deal.
In the absence of fresh news, the Chinese yuan slipped back
to the weaker side of 7-per-dollar at 7.0061 CNY= .
"It is a slightly more generalised firmer U.S. dollar. I
don't think this is news or fundamentally driven flows," said
Ray Attrill, head of FX strategy at National Australia Bank.
The greenback was a little weaker on the euro EUR= at
$1.1131. The kiwi NZD=D3 was knocked by an unexpectedly steep
drop in dairy prices, the top national export, pushing the
currency to a week low of $0.6555. The Australian dollar AUD=D3 held near its lowest in a
week as well ahead of crucial employment data due on Thursday. A
disappointment could bring forward another rate cut, especially
after the Reserve Bank of Australia (RBA) foreshadowed possible
easing in December meeting minutes released on Tuesday.
"The RBA minutes struck a more dovish tone than the
statement on the day, specifically citing the February meeting
as a suitable time to reassess the (currently upbeat) outlook,"
Westpac analysts said in a note.
Futures markets have priced an even chance of a benchmark
rate cut from an already record low 0.75%. 0#YIB .
(Editing by Sam Holmes and Jacqueline Wong)