FOREX-Dollar steady, sterling slips ahead of Bank of England meeting

·3 min read

* Dollar index slips as markets digest Fed comments

* BoE expected to leave monetary policy unchanged

* Graphic: World FX rates

LONDON, June 24 (Reuters) - The dollar slipped slightly in early European trade on Thursday, having spent the week gradually edging away from two-month highs hit after the U.S. Federal Reserve's surprise hawkish shift at its meeting last week.

Currency markets were quiet as traders weighed up different signals from Federal Reserve officials on the timing of a withdrawal of monetary stimulus.

The dollar index inched lower to 91.738 at 0715 GMT, having pared back some gains after hitting a two-month high of 92.408 on Friday.

The euro was a touch higher against the dollar, up 0.1% on the day at $1.1939.

The dollar got some support overnight from two Fed officials saying that a period of higher inflation in the United States could last longer than expected.

But on Tuesday, Fed Chair Jerome Powell had said that price pressures should ease on their own.

Six Fed officials are due to speak on Thursday, including New York Fed President John Williams, who on Tuesday said any conversation about when to adjust interest rates is still far off.

"It appears that the market pricing of (the) Fed’s rate expectations are already sitting on the hawkish side so that additional comments indicating early tapering/hikes now have a more contained and above all short-lived impact on sensitive assets," wrote ING FX strategists in a note to clients.

"We continue to expect the market to reward those currencies that are backed by tightening cycles (NOK, CAD and NZD are notable examples in G10 space), although the room for a rally in low yielders has probably shrunk."

Market attention is focused on the Bank of England meeting and policy announcement at 1100 GMT. No policy changes are expected but investors will be looking for any hints that the BoE will follow in the Fed’s footsteps as inflation pressures mount.

Andy Haldane is likely to vote again to scale back the bond-buying programme at his final meeting before leaving the BoE and market players will be keen to see if any other policymakers join him in doing so.

Sterling was a touch lower in early London trading, down 0.1% at $1.3962 and 85.495 pence per euro .

"I am not sure whether the BoE will send the signal the Sterling bulls are hoping for," wrote Commerzbank strategist Thu Lan Nguyen in a note to clients.

"I fear that it might be too early and that the recent rise in inflation wasn’t high enough yet. As a result, I see considerable potential for disappointment for Sterling today."

The Australian dollar, which is seen as a liquid proxy for currency market risk appetite, was flat on the day at $0.75745, having gained 1.3% so far this week.

The U.S. dollar was down 0.1% against the yen, after the pair hit a 15-month high of 111.11 overnight.

Elsewhere, bitcoin was down around 2%, at $33,000, having recovered somewhat from when it dropped to $28,600 on Tuesday. Ether was trading around $1,900.

U.S. jobs data is due later in the session.

(Reporting by Elizabeth Howcroft; Editing by Ana Nicolaci da Costa)