* Dollar index steady, near 7-month low
* Sterling up on eve of UK election
* Graphic: FX rates in 2017 tmsnrt.rs/2egbfVh
(Updates with U.S. market open, changes dateline from LONDON)
By Saqib Iqbal Ahmed
NEW YORK, June 7 The euro was slightly weaker
against the dollar on Wednesday, in choppy trading, on reports
suggesting the European Central Bank would lower its inflation
targets at Thursday's policy announcement.
The euro was down 0.11 percent to $1.1263, after having
fallen to a low of $1.1205, its lowest since Friday.
Bloomberg, citing unnamed euro zone officials, said the
central bank's staff forecasts for inflation for the next three
years had been cut to 1.5 percent, from 1.7 percent, 1.6 percent
and 1.7 percent, respectively in March.
Those have still to be approved by the two-day meeting of
the Governing Council, the report said, but, if true, would be a
signal of a softer line than many in currency and bond markets
have been expecting. The ECB declined to comment on the report.
"That would suggest that it would be very difficult for the
rate hawks on the governing council to force through an early
departure from the very accommodative policy that the ECB is
pursuing right now," said Shaun Osborne, chief FX strategist at
Scotiabank in Toronto, said.
The common currency has strengthened against the dollar over
the last few months, benefiting from broad greenback weakness
but also on the view that rising inflation would prompt the ECB
to raise interest rates in early 2018.
The euro pared losses after a Reuters report cited sources
as saying that the ECB is likely to nudge up its forecasts for
economic growth in the euro zone even as it trims its inflation
This mixed outlook should strengthen the case for keeping
the ECB's aggressive stimulus policy of massive bond purchases
and sub-zero rates in place.
The dollar steadied after having hit a near seven-month low
on Tuesday, largely because of nerves over the pace of U.S.
growth and government policy that have cut U.S. Treasury yields
to the lowest since November.
The dollar index, which tracks the greenback against
six major rivals, was down 0.02 percent at 96.614. Against the
yen, the greenback was down 0.06 percent to 109.33 yen.
Traders remained cautious before Thursday's election in
Britain, which some worry may be far closer than some opinion
polls indicate, and the U.S. Senate testimony of James Comey,
the former FBI chief sacked by President Donald Trump in May.
Sterling was up 0.39 percent to $1.2957, staying near
seven-month highs as investors increasingly take the view that
Prime Minister Theresa May's Conservative Party will win a
majority in parliament.
(Reporting by Saqib Iqbal Ahmed; Additional reporting by Ritvik
Carvalho and Patrick Graham in London; editing by Grant McCool)