FOREX-Dollar near 2-week high as investors wait for Fed after dovish ECB

* All eyes on Fed meeting, Powell speech
* Surprise Draghi u-turn sent euro to two-week low
* Yuan pulls back from three-week high on trade hopes
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Tommy Wilkes
LONDON, June 19 (Reuters) - The euro hovered near two-week
lows against the dollar on Wednesday as investors waited to see
if the U.S. Federal Reserve would follow the lead of the
European Central Bank and sound as dovish on future interest
rate cuts and stimulus.
ECB President Mario Draghi's about-face on easing on Tuesday
fuelled talk of a worldwide wave of central bank stimulus,
firing up stocks, bonds and commodities, although currency moves
were smaller. The Fed is scheduled to release its monetary policy
statement at 1800 GMT, followed by a press conference by
Chairman Jerome Powell shortly after. Futures are almost fully
priced for a quarter-point easing in July and imply more than 60
basis points of cuts by Christmas. The euro was unchanged at $1.1195 EUR=EBS in early London
trading, having fallen to a two-week low of $1.1181 on Tuesday
after Draghi struck a dovish tone. The common currency dropped
along with a decline in German government bond yields, which hit
a new record low.
The dollar, measured against a basket of rival currencies,
was flat at 97.621 .DXY after it hit a two-week high on
Tuesday.
The greenback had been under pressure in late May as
investors began to bet on Fed rate cuts in the face of global
trade tensions and some signs of economic weakness, but
expectations other central banks such as the ECB will follow
suit have since helped the dollar recover.
"Relative to what the market is priced for, it's hard to see
how they (the Fed) will surprise the market on the dovish side.
The risks are the other way," said Adam Cole, a currencies
strategist at RBC Capital Markets.
Cole said he believed the market was "underplaying" the
significance of the outright spread between Europe and the
United States, and even if the Fed cuts, investors will still be
paying to hold euros while earning a relatively good yield with
dollars.
That should support the dollar, with Cole predicting a euro
low of $1.10 this year.
U.S. President Donald Trump said on Tuesday he would have an
extended meeting with Chinese President Xi Jinping at the Group
of 20 leaders summit later this month, raising investors' hopes
that they can ease tensions in a trade dispute that has damaged
the world economy. "If a meeting between Trump and Xi goes well, sentiment will
improve, which will be supportive for dollar/yen," said Tohru
Sasaki, head of Japan markets research at JP Morgan Securities.
The yen was up 0.2% at 108.28 yen per dollar JPY=EBS ,
suggesting investors remained cautious.
China's yuan pulled back from a three-week high hit on
Tuesday following news Xi and Trump would meet. The offshore
yuan last traded at 6.9062 CNH=EBS , down 0.1% on the day.
Sterling was little moved by Boris Johnson's confirmation as
the frontrunner in the Conservative Party leadership contest. It
was last down 0.1% at $1.2547 GBP=D3 .