(Adds oil, gold settlement prices)
* GRAPHIC: World FX rates in 2019 tmsnrt.rs/2egbfVh
* Dollar gains as traders pare bets on bold U.S. rate cut
* Gold sheds 1% as bets on big U.S. rate cut fades
* European stocks close lower, Wall Street rises
By Herbert Lash
NEW YORK, June 26 (Reuters) - The dollar rose and European shares fell on Wednesday as traders curbed expectations of an aggressive cut in U.S. interest rates in July, while Wall Street rose on hopes of a China-U.S. trade break-through at the G20 summit later this week in Japan.
Gold fell about 1% after Federal Reserve Chairman Jerome Powell said on Tuesday the U.S. central bank is "insulated from short-term political pressures," suggesting policymakers would not bow to President Donald Trump's call to sharply cut rates.
Trump said Powell was doing a "bad job" and he urged the Fed to lower rates so that U.S. exports can compete with countries that he said are devaluing their currencies.
A pullback in the Japanese yen and Swiss franc was limited amid trader doubts the U.S.-China trade spat will be resolved anytime soon. Bidding for both safe-haven currencies persisted amid tensions between Iran and the United States.
"Our expectation is that there will be some sort of trade truce or some goodwill signs coming out of the G20 meetings between Donald Trump and (Chinese President) Xi Jinping," said David Kelly, chief global strategist at JPMorgan Funds.
"But neither side is ready to end the war," Kelly said, adding trade differences between the two countries likely will continue through to the U.S. presidential elections in November 2020.
Earlier Wednesday, Trump told Fox Business Network he would impose additional duties on Chinese imports if he does not clinch a deal with Xi.
MSCI's gauge of stocks across the globe shed 0.19% and the FTSEurofirst 300 index of leading European shares closed down 0.3%.
Stocks mostly rose on Wall Street, though the benchmark S&P trended lower late in the session.
The Dow Jones Industrial Average rose 6.24 points, or 0.02%, to 26,554.46. The S&P 500 lost 3.99 points, or 0.14%, to 2,913.39 and the Nasdaq Composite added 20.15 points, or 0.26%, to 7,904.87.
Gold snapped a six-session streak of gains after prices hit a six-year peak of $1,438.63 on Tuesday, mostly on expectations the Fed would cut rates in acknowledgment of slowing growth.
U.S. gold futures settled 0.2% lower to $1,415.40 to remain above the key psychological level of $1,400 level.
The Fed is still on target to cut rates in July but it will not spur the economy, Kelly said.
"If they start to cut rates it will not boost economic growth and very likely it's the start of serious cuts, not just one," he said.
Bitcoin jumped to an 18-month high, as investors looked for safety in alternative investments amid geopolitical tension, and cheered prospects that Facebook Inc's Libra token could push cryptocurrencies into the mainstream.
The greenback was slightly lower against the euro at $1.1367, and the dollar index edged up 0.08%.
The Japanese yen weakened 0.61% versus the greenback at 107.82 per dollar.
The benchmark 10-year U.S. Treasury note fell 16/32 in price to lift its yield to 2.0485%.
Germany's 10-year bond yield nudged off record lows, with the Bund yielding minus 0.306%, just above record lows hit Tuesday at almost minus 0.34%.
Oil prices rose more than 2%, buoyed by U.S. government data that showed a much larger-than-expected drawdown in U.S. crude inventories and surprise drops in refined product stockpiles.
Brent crude futures settled up $1.44 at $66.49 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose $1.55 to settle at $59.38 a barrel. (Reporting by Herbert Lash Editing by Susan Thomas and Lisa Shumaker)