FOREX-Dollar hits two-week high as traders pause before Fed meeting

* Strong data last week support dollar
* Euro struggles near $1.12
* Sterling heads towards January low
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(Adds details, updates prices)
By Tommy Wilkes
LONDON, June 17 (Reuters) - The U.S. dollar rose to a
two-week high on Monday as recent strong economic data led
investors to think again about how dovish the Federal Reserve is
likely to sound at this week's monetary policy meeting.
Broader currency markets were quiet, as traders hesitated to
put on large positions before the Fed's two-day meeting, a
meeting of European Central Bank policymakers in Portugal and
the Bank of England's interest rate decision on Thursday.
Strong U.S. retail sales on Friday reduced the already-low
chances of a rate cut this week and lifted the dollar, although
Fed Chairman Jerome Powell may lay the groundwork for a rate cut
later this year.
Expectations of a rate cut at the Fed's June 18-19 meeting
have fallen to a probability of around 20%. But bets for
monetary easing at its July meeting remain high, with money
markets pricing in 24 basis points of cuts from current rates.
Investors are scaling back their dollar long positions,
according to CFTC data published last week. But analysts are not convinced the euro can seize on dollar
weakness to move higher.
"Despite what should be a softer dollar environment this
summer, there are enough EUR negatives out there (ECB easing,
trade wars, Italy & Brexit to name a few) to prevent EUR/USD
breaking out of a $1.10-$1.15 range this year," analysts at ING
said.
The dollar index, which measures it against a basket of
currencies, hit a two-week high of 97.603 .DXY , up marginally
on the day.
The euro was little changed at $1.1213 EUR=EBS , as
investors awaited policymakers speeches at the ECB meeting in
Sintra in Portugal and Tuesday's euro zone inflation data.
While fears that a protracted Sino-U.S. standoff could tip
the global economy into recession have prompted rate cuts in
India, Philippines, Malaysia, New Zealand and Australia, the ECB
has also signalled the prospect of more stimulus.
Analysts say the path for rate cuts will depend on
U.S.-China talks to resolve a conflict over trade.
"Markets are pricing a high probability of a July (Federal
Reserve) cut, despite there being unusually high uncertainty,
particularly around trade. We find it hard to believe that the
Fed would cut rates if post-G20, for example, there were a
de-escalation of tensions with China (eg simply a resumption of
talks)," said RBC strategist Elsa Lignos.
The dollar was up 0.5 versus the Japanese currency to 108.63
yen JPY= .
Sterling slid further towards a 2019 low, touching as low as
$1.2573 GBP=D3 , its weakest since January. Investors worry
Boris Johnson, the frontrunner to replace Prime Minister Theresa
May, could put Britain on a path towards a no-deal Brexit.

(editing by Larry King)