FOREX-Euro pinned near 3-week lows as big U.S. rate cut bets dim

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* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Euro close to 3-week low as dollar maintains strength
* Fed chief Powell's comments to set the tone for currencies

By OLGA COTAGA
July 10 (Reuters) - The euro held near a three-week low
against the dollar on Wednesday as investors trimmed
expectations of aggressive rate cuts from the U.S. Federal
Reserve later this month, pushing U.S. Treasury yields and the
greenback higher.
Expectations of easier monetary policy from U.S.
policymakers soared last month and traders were waiting to see
if Fed Chair Jerome Powell would give more clues on its plans
during Congressional testimony starting on Wednesday.
"The Fed is headed for a rate cut, but expectations
surrounding the speed and scale of cuts had gotten out of hand,"
said Tsutomu Soma, general manager of fixed income business
solutions at SBI Securities in Tokyo.
"Now we're scaling things back. U.S. economic data is not as
bad as Europe or other countries. This will support the dollar."
Expectations for a 50 basis point rate cut at a Fed meeting
later this month have evaporated, but investors still expect a
25 basis points cut due to weak inflation and worries about
growing business fallout from the U.S.-China trade war.
The euro EUR=EBS was last flat at $1.1211, not far from
the $1.1194 low, losing 1.3% of value against the greenback in
the past couple of weeks.
A broad index that tracks the greenback's performance
against six other major currencies .DXY =USD was at 97.503
after touching 97.588 on Tuesday, which was the highest since
June 19.
"Coming off the back of a stronger than expected jobs report
Chairman Powell is unlikely to paint as grim a picture as what
is currently priced into the financial markets," said Derek
Halpenny, currency strategist at MUFG.
"So the risk today is toward U.S. rates moving a little
higher and the dollar strengthening modestly further in
response."
Yields on benchmark U.S. Treasury yields US10YT=RR edged
up to a three-week high of 2.11%, breaking a two-month falling
streak and supporting the dollar.
Analysts said the dollar should benefit if Powell's comments
on the U.S. economy are perceived as neutral or even slightly
hawkish, which would support the argument that additional rate
cuts will be limited.
While expectations of a quarter point rate cut is firmly
baked into the market, hopes of a 50-basis point cut has dropped
to zero from nearly 20% a month ago, according to CME's
Fedwatch.
Sterling GBP=D3 was little changed at $1.2466, close to
$1.2439, the lowest it's been since April 2017.