July 24, 2019 / 7:09 PM / 5 months ago

FOREX-Euro slides to two-month low on bleak euro zone data; dollar index flat

    * Investors expect ECB to signal significant easing
    * Sterling rises as Boris Johnson appointed UK prime minister
    * Johnson vows to lead Britain out of EU on Oct. 31
    * Mueller testimony has little impact on dollar
    * Weak U.S. housing, manufacturing data bolster Fed cut view 
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Adds comment, U.S. data, UK's Johnson speech, updates prices)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 24 (Reuters) - The euro fell to a two-month low against the dollar
on Wednesday, weighed down by weak economic data that bolstered expectations that the
European Central Bank could undertake aggressive monetary policy easing as soon as
this week.
    The dollar was little changed against a basket of currencies after three straight
days of gains, trading in narrow ranges ahead of monetary policy meetings at the ECB
on Thursday and the Federal Reserve next week.
    U.S. data on Wednesday overall were weaker than expected, with manufacturing
activity slowing to a near 10-year low in early July. U.S. new home sales rebounded
in June, but sales for the prior three months were revised lower.
    Yasemin Engin, assistant economist at Capital Economics in London, said the U.S.
manufacturing data "adds support to the widely-held expectation that the Fed will cut
interest rates next week, despite the relative strength of some of the recent hard
    In the euro zone, 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. 
    "Our base case looks for a dovish message overall but nothing further to be
delivered at this stage," said Ned Rumpeltin, European head of FX strategy at TD
Securities in London. "A significant dovish shift tomorrow could still push (the
euro) lower into a new trading range below $1.11." 
    In afternoon trading, the euro was down 0.1% at $1.1137 after earlier
hitting $1.1128, its lowest since May 30.
    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 0.1% lower against the yen at 108.17 yen. Against a basket
of currencies, the greenback was little changed at 97.704. 
    The greenback showed little reaction to the testimony of former Special Counsel
Robert Mueller to U.S. Congress, who said on Wednesday he had not exonerated
President Donald Trump of obstruction of justice.
    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 0.4% at $1.2483, not far from the 27-month low of
$1.2382 it hit last week. It rallied 0.6% versus the euro, which dropped to 89.16
    The pound extended gains after Johnson, in his first speech as prime minister,
promised to lead Britain out of the European Union on Oct. 31 with "no ifs or buts"
and warned that if the European Union refused to negotiate then there would be a
no-deal Brexit.
    Currency bid prices at 1446 EDT (1846 GMT):
 Description      RIC      Last      U.S.      Pct      YTD Pct  High Bid   Low Bid
                                     Close     Change   Change              
 Euro/Dollar      EUR=     $1.1135   $1.1151   -0.14%   -2.91%   +1.1158    +1.1128
 Dollar/Yen       JPY=     108.1800  108.2100  -0.03%   -1.89%   +108.2700  +107.9500
 Euro/Yen         EURJPY=  120.47    120.67    -0.17%   -4.56%   +120.7100  +120.2200
 Dollar/Swiss     CHF=     0.9857    0.9851    +0.06%   +0.44%   +0.9874    +0.9837
 Sterling/Dollar  GBP=     1.2485    1.2436    +0.39%   -2.13%   +1.2522    +1.2428
 Dollar/Canadian  CAD=     1.3144    1.3132    +0.09%   -3.62%   +1.3150    +1.3119
 Australian/Doll  AUD=     0.6975    0.7004    -0.41%   -1.05%   +0.7008    +0.6973
 Euro/Swiss       EURCHF=  1.0980    1.0985    -0.05%   -2.43%   +1.1005    +1.0973
 Euro/Sterling    EURGBP=  0.8920    0.8962    -0.47%   -0.71%   +0.8968    +0.8907
 NZ               NZD=     0.6704    0.6702    +0.03%   -0.19%   +0.6723    +0.6692
 Dollar/Norway    NOK=     8.6454    8.6757    -0.35%   +0.08%   +8.6929    +8.6247
 Euro/Norway      EURNOK=  9.6270    9.6780    -0.53%   -2.82%   +9.6874    +9.6157
 Dollar/Sweden    SEK=     9.4250    9.4679    -0.55%   +5.15%   +9.4870    +9.4173
 Euro/Sweden      EURSEK=  10.4989   10.5573   -0.55%   +2.29%   +10.5743   +10.4967
 (Reporting by Gertrude Chavez-Dreyfuss
Editing by Sonya Hepinstall)
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