* Dollar little changed ahead of G20 meeting
* Euro on track for best month in 17 months
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Releads with dollar, adds new quote, context, updates prices)
By Saikat Chatterjee and OLGA COTAGA
LONDON, June 28 (Reuters) - The dollar dipped on Friday
after U.S. economic data confirmed the likelihood of a July
interest rate cut, although foreign exchange markets seemed on
hold as investors awaited the meeting between the United States
and China at the G20 summit in Japan.
The core U.S. personal consumption expenditure price index
rose 0.2% in May, as expected, reinforcing investor expectations
that the Federal Reserve will cut rates by 25 basis points to
2.25% at the next meeting.
As result, the dollar reaction to the data was limited and
it last traded 0.1% lower at $1.1381 EUR=EBS , though it has
fallen by around 1.7% in the past couple of weeks.
"In the big themes today, the data doesn't change the July
cut," said Kenneth Broux, head of corporate research at Societe
Generale.
The euro was on track for its biggest monthly gain in 17
months on the back of broad-based dollar weakness.
Moreover, it remains unclear whether U.S. President Donald
Trump and Chinese President Xi Jinping will agree on a truce or
escalate their trade conflict further, leaving investors unsure
about how to trade the dollar.
Still, markets are hoping that a meeting between the two
government heads at the G20 in the Japanese city of Osaka will
bring progress on trade.
Negotiations between the world's two largest economies have
been fraught, however, and traders and analysts caution that a
resolution at the G20 summit is far from certain.
"I'm personally quite pessimistic on any deal being made,"
said Jordan Rochester, G10 forex strategist at Nomura.
However, any falls in the dollar are unlikely to become
sustained and so "the euro at $1.14 is a sell," Rochester said.
While inflation expectations in the United States and Europe
have declined in recent weeks, as measured by forward-starting
swaps, U.S. gauges have stabilised after the Federal Reserve
opened the door to rate cuts last week.
In comparison, policy interest rates in Europe are already
in negative territory and Europe's most widely watched measure
of inflation expectations - the five-year, five-year forward
rate - has started declining again.
"The elbow-room for the ECB to ease policy is far more
limited than the (U.S.) Fed and that is weighing on the euro,"
said Esther Reichelt, FX strategist at Commerzbank.
The dollar index .DXY , which measures the U.S. currency
against six of its peers, was at 96.110, broadly unchanged on
the week.
The dollar traded at 107.77 yen JPY=EBS , little changed on
the day but on course for a 0.3% gain this week as the greenback
mounted a recovery from a five-month low of 106.77 yen reached
on Tuesday.
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