FOREX-Euro eases towards $1.12 as investors await central bank moves

* Big period for policy meetings begins with ECB
* Dollar up vs euro on safe-haven demand
* Swiss franc reaches new two-year high vs euro
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

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By Tommy Wilkes
LONDON, July 22 (Reuters) - Foreign exchange markets paused
on Monday as investors wait to see by how much and how fast
policymakers might ease policy, beginning with the European
Central Bank on Thursday.
The euro edged down towards $1.12 as the dollar gained the
upper hand, thanks mostly to safe-haven demand amid rising
tensions in the Middle East.
The Swiss franc hit a new two-year high against the euro,
touching 1.1010 francs per euro EURCHF=EBS . The Swiss currency
has benefited from investors looking for a refuge from worries
about the euro zone economy.
Data published last week indicated that investors remain net
long of dollars, unchanged from the previous week, with the U.S.
currency having weathered rising expectations for interest rate
cuts from the Federal Reserve relatively well.
Currency markets have been stuck in narrow trading ranges in
recent weeks, with expectations for easing by both the Federal
Reserve and the ECB more or less cancelling out the impact on
the euro and the dollar.
Pricing for a 50-basis-point Fed cut soared last week after
a dovish speech by New York Fed President John Williams. Those
expectations later dwindled after a Fed spokesman clarified that
the remarks did not refer to "potential policy actions".
Priced-in forecasts for a 50-basis-point cut have dropped
from as high as 71% last week to 18.5% on Monday, with a 25 bps
cut now seen as more likely. FEDWATCH
"FX markets don't tend to get too excited about monetary
policy when it's all nuance and forward guidance, but when
central banks are making actual rate moves and QE adjustments,
monetary policy becomes the driving theme," BMO Capital Markets
strategist Stephen Gallo said.
The Fed holds its monetary policy meeting next week, as does
the Bank of Japan.
The euro nudged lower to $1.1217 EUR=EBS after earlier
reaching $1.1208. The dollar index rose 0.1% to 97.203 .DXY .
Analysts said the dollar was benefiting from geopolitical
tensions surrounding a confrontation in the Strait of Hormuz,
the oil trade's most important waterway. The dollar rose 0.1% against the yen to 107.89 JPY=EBS
after earlier breaching the 108 level.
Despite the dollar's recent resilience, some analysts think
the U.S. currency is set for a fall.
"The USD looks to have peaked. We see medium-term downside
on narrowing interest rate differentials and relative growth
prospects that could be accelerated by U.S. intervention to
weaken the currency," Citi analysts wrote in a research note.
"We anticipate a modest appreciation of the EUR over the
longer term, but considerable risks exist if QE (quantitative
easing) is accelerated."
Sterling weakened again, falling 0.3% to $1.2469 GBP=D3
after Alan Duncan, a British minister and longstanding critic of
Boris Johnson quit, decrying the "dark cloud" of Brexit. Johnson
is expected to win a Conservative party leadership contest and
be appointed prime minister this week. The pound was also 0.3% lower against the euro, at 89.995
pence EURGBP=D3 .

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(Editing by Larry King and Susan Fenton)