Euro at over two-month lows ahead of likely ECB rate cut; dollar firms
Euro near two-month lows ahead of widely expected ECB rate cut
ECB rate decision at 1215 GMT followed by Lagarde remarks
'Trump trade' helps keep dollar near highs
Updates at 1104 GMT
By Medha Singh and Rae Wee
SINGAPORE/LONDON, Oct 17 (Reuters) -The euro drifted near a more than two-month low on Thursday ahead of an expected European Central Bank rate cut, while the dollar hit its highest in 11-weeks on the prospect Trump, whose policies the market considers more bullish, will win the U.S. election.
The ECB is expected to cut its deposit rates by a quarter-point when it publishes its policy decision at 1215 GMT followed by a news conference from President Christine Lagarde a half hour later that will be parsed for clues on future moves.
Weak economic data in the euro area and dovish comments from ECB officials have prompted traders to price in that the ECB will deliver a third rate cut this year, diminishing the euro's appeal.
Money markets almost fully price in three further reductions through March 2025.
"The ECB might potentially be forced to consider more aggressive easing depending on data on growth and inflation so the prospects, at least for near term, are not so brilliant for the euro," said Roberto Mialich, forex strategist at UniCredit.
The bloc's common currency EUR=EBS traded close to flat versus the dollar at 1.086400, after falling for six straight sessions.
In the broader market, the dollar hovered near its highest level since early August against a basket of peers at 103.50.
The yen JPY=EBS struggled near the 150 per dollar level and was last at 149.610.
Sterling GBP=D3 firmed slightly to $1.30110 but was still close to Wednesday's two-month low that followed lower-than-expected UK inflation data.
The dollar has drawn support from a run of upbeat data on the U.S. economy, which has in turn caused traders to reduce their expectations of Fed rate cuts FEDWATCH, but also on the higher chances of a victory by Republican presidential candidate Donald Trump at next month's election.
"His core policies on tariffs, immigration, and taxes would produce a more inflationary outlook in the U.S., diminishing prospects for aggressive Fed rate cuts over the cycle," said Thierry Wizman, global FX and rates strategist at Macquarie.
Analysts expect the dollar to strengthen in the event of a Trump victory and for bonds to come under pressure.
A spate of U.S. data including industrial production, retail sales and weekly jobless claims due later in the day are also on investors' radar.
"If the U.S. data surprises on the weak side, we can imagine that this might offer some floor to the euro dollar," Mialich said.
CHINA DISAPPOINTMENT
A news conference in Beijing focused on measures to prop up the country's property sector.
However, it failed to excite markets as policymakers essentially reiterated their commitment to boost the housing market, but did not announce any of the new significant measures some investors hope for.
The Australian dollar AUD=D3, often used as a liquid proxy for the yuan, gained 0.5% to $0.6696, as the disappointment from China offset some of the Antipodean currency's strong gains from an upbeat jobs report at home.
Stronger-than-expected jobs data for September led traders to pare back bets on a first interest rate cut from the Reserve Bank of Australia (RBA) in December.
World FX rates https://tmsnrt.rs/2RBWI5E
Reporting by Rae Wee in Singpapore and Medha Singh in London; Editing by Shri Navaratnam, Stephen Coates, Barbara Lewis, Alexandra Hudson
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