FOREX-Euro steady as EU summit underway, dollar set for weekly gains

* Small weekly rise would be dollar's best since May
* Euro stable ahead of EU Summit
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Julien Ponthus
LONDON, June 19 (Reuters) - The euro held steady on Friday
as an EU summit focused on a 750 billion euro recovery fund got
underway, while geopolitical strains and fears of a second wave
of COVID-19 cases set the dollar on track for its best weekly
gain in a month.
The world's reserve currency, which was making small
advances in European trading, has gained about 0.3% this week
against a basket of currencies =USD , its best performance
since mid-May.
It was up 0.06% at 97.49, close to its highest levels since
June 4.
Tensions remain high between China and India despite the
two Asian nuclear powers agreeing to try to de-escalate their
border confrontation in the western Himalayas.
U.S. President Donald Trump, meanwhile, renewed his threat
to cut ties with China, a day after the first high-level talks
between the countries in months.
Traders were switching their attention to a European Union
summit which will seek to bridge regional divisions over a
coronavirus recovery fund which would bring the bloc closer to a
fiscal union. European Central Bank head Christine Lagarde told EU
leaders that their economy was in a "dramatic fall" and called
on the bloc to act to spearhead revival, diplomatic sources and
officials said.
Sweden, Denmark, Austria and the Netherlands - the bloc's
so-called "frugal four" - say the proposed recovery fund is too
big and the allocation of money not sufficiently linked to the
pandemic.
"Hopes of a breakthrough on the recovery fund have been
managed downwards recently, and the signs are instead pointing
to an agreement no sooner than an as-yet unscheduled summit
meeting in July", Deutsche Banks analysts told clients in their
morning note.
Austrian Chancellor Sebastian Kurz confirmed these
expectations on Friday, saying he hoped an agreement could be
reached in July but that a key issue would be which countries
should benefit most from the fund.
The euro EUR= was flat at $1.1225, having lost about 1%
against the dollar since Tuesday on doubts over whether the plan
can be realised.
The British pound GBP=D3 was down 0.35% at $1.2385 after
data showed that public borrowing hit a record high with debt
exceeding economic output. Trade talks with the EU were also in the spotlight.
French Junior European Affairs Minister Amelie de Montchalin
said she could not rule out Brexit talks ending without a deal,
adding that it remained in Britain's interests to reach one.
It also emerged that British Foreign Minister Dominic Raab
would hold talks with his counterparts from Germany and France
on Friday in Berlin.
Separately, markets have been focused on an uptick in
coronavirus cases in many U.S. states this week as well as new
infections detected in Beijing, raising fears of a return to
global lockdowns.
"Even if we do not see a 'second wave', a renewed rise in
infection numbers illustrates that things are not going to
return to normal for a long time," Commerzbank analysts argued.