FOREX-Sterling struggles on Brexit worries, weighs on euro

* Pound nears 6-month low following sizeable overnight drop
* Fed rate cut prospects keep dollar/yen under pressure
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

By Shinichi Saoshiro
TOKYO, July 16 (Reuters) - The pound struggled near a
six-month low against the dollar on Tuesday hampered by
persistent worries over Brexit that, in turn, weighed on the
euro.
The dollar fought for traction against the yen as the
prospect of a Federal Reserve interest rate cut later in the
month continued to keep the greenback on the defensive.
The pound GBP=D4 stood steady at $1.2519 following an
overnight loss of 0.5%. A slip below $1.2439 would take sterling
to its lowest since early January.
The euro EUR= was little changed at $1.1251 after shedding
0.1% the previous day, constrained by expectations for a dovish
European Central Bank meeting next week.
Sterling was under pressure as investors were nervous about
the prospect of eurosceptic Boris Johnson winning the
Conservative party leadership contest and becoming the next
British prime minister as early as the end of this month.
Poor economic data and signals from the Bank of England that
it could cut interest rates instead of raising them as
previously expected have also hit the pound.
"The euro has been weighed by the long struggling pound,
which in turn is likely to suffer from Brexit-related woes until
the Conservative party leader is decided next week," said Yukio
Ishizuki, senior currency strategist at Daiwa Securities.
The dollar was little changed at 107.900 yen JPY= .
The U.S. currency rose to a six-week high of 108.990 yen
last week but slid after Federal Reserve Chairman Jerome Powell
set the stage for a rate cut later this month by giving a sombre
outlook on the world's largest economy.
The dollar lost further ground against the yen towards the
end of last week after Chicago Fed President Charles Evans said
on Friday that "a couple" of rate cuts were needed to boost
inflation. The dollar index .DXY versus a basket of six major
currencies was nearly flat at 96.921 after edging up 0.13% the
previous day.
The Australian dollar AUD=D4 was unchanged at $0.7038
after gaining about 0.3% the previous day, getting a lift from
Chinese economic data which either matched or beat market
forecasts.
The Aussie is sensitive to the economic fortunes of China,
Australia's largest trading partner.