FOREX-Dollar steady as markets await Fed verdict, pound struggles

* Dollar caught in narrow range ahead of Fed's policy
verdict
* Fed seen cutting rates by 25 bps, focus on future policy
path
* Sterling catches a breather after fall, still down 4.3% in
July
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Shinichi Saoshiro
TOKYO, July 31 (Reuters) - The dollar held steady on
Wednesday, largely in a wait-and-see mode as traders looked
ahead to the outcome of the Federal Reserve's meeting later in
the day when policymakers are expected to cut interest rates
for the first time since 2008.
With markets predicting the Fed to reduce its key rate by
25 basis points, the main focus was on whether it would leave
the door open for further policy easing in a bid to insulate the
world's largest economy from slowing global growth and the
fallout of trade conflicts.
"The Fed will likely try and not dash the prospect of a
future rate cut held by the markets. But at the same time
Chairman (Jerome) Powell is certainly not in a position to
promise an upcoming cut, so he is expected to keep his wording
as vague as possible," said Yukio Ishizuki, senior currency
strategist at Daiwa Securities.
"Any vague policy references would provide the dollar with
an extra lift as it would further temper excessive easing
hopes."
CME's FedWatch Tool shows 78% of traders pricing in a 25 bp
cut. But the remaining 22% still see a deeper 50 bp easing as a
possibility.
The federal funds rate is currently set in a range of 2.25%
to 2.50%. Traders of futures tied to the rate have priced in a
full percentage-point drop by the end of next year.
The dollar index .DXY against a basket of six major
currencies stood little changed at 98.036 after pulling back
from a two-month high of 98.206 touched on Tuesday.
The greenback traded a shade lower at 108.530 yen JPY= and
the euro EUR= inched up 0.05% to $1.1159. The Bank of Japan
(BOJ) on Tuesday left policy settings steady though some suspect
a move to further ease monetary conditions might not be far off.
The pound, which has tumbled this week as investors rushed
to factor in the possibility of Britain leaving the European
Union without a deal, managed to stabilise somewhat.
Sterling GBP=D4 was 0.1% higher at $1.2157, crawling back
from a 28-month trough of $1.2120 plumbed on Tuesday.
Troubles for the currency, which has lost 4.3% in July, were
still seen to be far from over as Britain's new prime minister
Boris Johnson took over with the explicit agenda of pulling the
country out of the EU by Oct. 31, whether transitional trading
agreements are in place or not.