FOREX-Weak data, rate cut bets push dollar from two-year high

* Dollar off two-year high after weak capital goods, PMI
data
* Euro bolstered by defeat of euroskeptics in Dutch vote
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Recasts; updates prices; changed dateline, LONDON previous)
By Kate Duguid
NEW YORK, May 24 (Reuters) - The dollar fell on Friday from
a two-year high after orders for U.S.-made capital goods fell,
further evidence that manufacturing and the broader economy are
slowing, due in part to the trade conflict with China.
The weaker-than-expected data, a closely watched proxy for
business spending plans, added to the dollar's fall, which began
Thursday following a report that showed manufacturing activity
hit its lowest level in almost a decade in May. Together, the
reports suggested a sharp slowdown in U.S. economic growth was
under way, which could affect the dollar's safe-haven status. Against a basket of six major currencies, the dollar .DXY
was down 0.16% at 97.698 and 0.69% off a two-year high of 98.371
hit the previous session.
"Lot of people for good reasons thought trade wars may be
U.S. dollar-positive and other countries cannot retaliate," said
Commerzbank FX strategist Ulrich Leuchtmann.
"But in reality, it's more difficult. This very
disappointing PMI data and other factors like the Huawei story
are all creating stress for the U.S. economy and derailing
sentiment."
China on Friday denounced U.S. Secretary of State Mike
Pompeo for fabricating rumors after he said the chief executive
of China's Huawei Technologies Co Ltd HWT.UL was lying about
his company's ties to the Beijing government. Escalating trade tensions and weak data have fuelled rate
cut expectations by the Fed. Money markets broadly expect one
rate cut by October followed by another by January 2020.
Dollar weakness also helped boost sterling from a 4-1/2
month low GBP= , though the rally was primarily driven by UK
Prime Minister Theresa May's announcement on Friday that she
would quit, setting up a contest that will bring a new prime
minister to power who could pursue a cleaner break with the
European Union. It was last up 0.14% at $1.267. The euro was also stronger on Friday, up 0.18% to $1.20
benefiting from the dollar's weakness, and from the Dutch part
of the EU parliamentary elections. An exit poll showed the
Labour party of European Commissioner Frans Timmermans won a
surprise victory over a euroskeptic challenger who had been
topping opinion surveys. The single currency is down 2.3% this year, which led
analysts at Bank of America to change their forecast of the
euro's price at the end of 2019 from $1.20 to $1.17.