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Europe, Forex

Euro falls to 2-month low on bleak euro zone data; dollar index dips

* Investors expect ECB to signal significant easing * Euro heads towards $1.11; Swiss franc stuck near 2-year high * Sterling above two-year lows ahead of Johnson speech * Dollar reacts little to Mueller testimony * Graphic: World FX rates in 2019 (New throughout, updates prices, market activity, comments; new byline, changes dateline, previous LONDON) By Gertrude Chavez-Dreyfuss NEW YORK, July 24 (Reuters) – The euro fell to a two-month low against the dollar on Wednesday, hit by weak economic data that bolstered speculation the European Central Bank could undertake aggressive monetary policy easing as soon as this week. The dollar was modestly lower against a basket of currencies after three straight days of gains, generally trading in narrow ranges ahead of monetary policy meetings at the ECB on Thursday and the Federal Reserve next week. The greenback showed little reaction to the testimony of former U.S. Special Counsel Robert Mueller, who said he had not cleared President Donald Trump of obstruction of justice. Financial markets are focused on the ECB and Fed policy meetings. Money markets are pricing in a 54% chance of a 10-basis-point cut at Thursday’s ECB meeting. The probability rose after the eurozone purchasing managers’ index unexpectedly fell to a three-month low of 51.5 in July from 52.2 in June. Economists polled by Reuters had expected a slight decline to 52.1. The 50 mark separates economic growth from contraction. The ECB could also signal further reductions down the road or a fresh round of quantitative easing (QE), investors said. “We think the ECB will keep rates on hold tomorrow, but will adjust its forward guidance, paving the way for a 10 basis-point cut in September,” said Ned Rumpeltin, European head of FX strategy, at TD Securities in London. “Our base case looks for a dovish message overall but nothing further to be delivered at this stage. A significant dovish shift tomorrow could still push (the euro) lower into a new trading range below $1.11,” he added. In mid-morning trading, the euro was down slightly at $1.1146 <EUR= after earlier hitting $1.1128, its lowest since May 30. The euro hit a two-year low of $1.1106 in May. Markets betting on ECB easing have lifted the Swiss franc , with the euro slipping 0.1% to 1.0974 francs, not far from the two-year high of 1.0972 reached on Tuesday. The euro has shed 2% of its value this month as investors priced in the probability of euro zone borrowing costs falling deeper into negative territory. The dollar was 0.2% lower against the yen at 108.05 yen . Against a basket of currencies, the greenback was down 0.1%. The dollar gained the previous day after Washington reached a deal to lift government borrowing limits, which analysts said could limit the Fed’s appetite for rate cuts. The pound rose slightly from recent lows after Boris Johnson on Tuesday won the contest to be Britain’s next prime minister, focusing investor attention on the prospect of a no-deal Brexit. Sterling was last up 0.3% at $1.2490, not far from the 27-month low of $1.2382 it hit last week. It rallied 0.5% versus the euro, which dropped to 89.23 pence. ======================================================== Currency bid prices at 9:39 AM (1339 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1147 $1.1151 -0.04% -2.81% +1.1158 +1.1128 Dollar/Yen JPY= 108.0400 108.2100 -0.16% -2.01% +108.2700 +108.0000 Euro/Yen EURJPY= 120.45 120.67 -0.18% -4.57% +120.7100 +120.2200 Dollar/Swiss CHF= 0.9847 0.9851 -0.04% +0.34% +0.9874 +0.9843 Sterling/Dollar GBP= 1.2481 1.2436 +0.36% -2.16% +1.2522 +1.2428 Dollar/Canadian CAD= 1.3130 1.3132 -0.02% -3.72% +1.3147 +1.3124 Australian/Doll AUD= 0.6984 0.7004 -0.29% -0.92% +0.7008 +0.6973 ar Euro/Swiss EURCHF= 1.0978 1.0985 -0.06% -2.45% +1.1005 +1.0974 Euro/Sterling EURGBP= 0.8929 0.8962 -0.37% -0.61% +0.8968 +0.8907 NZ NZD= 0.6709 0.6702 +0.10% -0.12% +0.6714 +0.6692 Dollar/Dollar Dollar/Norway NOK= 8.6330 8.6757 -0.49% -0.07% +8.6929 +8.6342 Euro/Norway EURNOK= 9.6248 9.6780 -0.55% -2.84% +9.6874 +9.6260 Dollar/Sweden SEK= 9.4372 9.4679 -0.35% +5.28% +9.4870 +9.4330 Euro/Sweden EURSEK= 10.5206 10.5573 -0.35% +2.50% +10.5743 +10.5220 (Reporting by Gertrude Chavez-Dreyfuss; Additional repporting by Olga Kotaga in London; Editing by David Gregorio)

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