* Euro steady ahead of ECB policy meeting
* Sterling trades near 2-week high before UK election
* Dollar recovers from 7-week low vs yen
SINGAPORE, June 8 The euro held steady on
Thursday ahead of the European Central Bank's policy
announcement, while sterling was supported by expectations that
Prime Minister Theresa May's party will win a majority in
The common currency was fetching $1.1251, having
regained some footing after slipping to as low as $1.1204 on
Wednesday, pressured by reports suggesting the ECB would lower
its inflation targets.
Bloomberg, citing unnamed euro zone officials, said the
central bank was preparing to lower its annual inflation
forecast for the next three years to 1.5 percent, from 1.7
percent, 1.6 percent and 1.7 percent, respectively.
The new estimate which is subject to approval by the
Governing Council, would signal a softer line than many in
currency and bond markets have been expecting. The ECB declined
The euro later pared losses after a Reuters report cited
sources as saying the ECB is likely to nudge up its forecasts
for economic growth in the euro zone even as it trims its
"To me, the risk for the euro is tilted toward the upside,
given that the market already traded yesterday based on a dovish
image (of the ECB)," said Satoshi Okagawa, senior global markets
analyst for Sumitomo Mitsui Banking Corporation in Singapore.
The euro is likely to be bought if the ECB were to keep its
inflation estimates unchanged, Okagawa added.
The ECB is widely expected to keep its policy unchanged on
Thursday, including its 2.3 trillion euro bond buying programme
and pledge to keep rates low.
Sterling held steady at $1.2961, trading near
Wednesday's peak of $1.2970, its highest level since May 25.
The pound gained 0.4 percent on Wednesday, with investors
increasingly taking the view that May's party will win a
majority in the election on Thursday.
Opinion polls showed on Wednesday that May is on course to
increase her majority in parliament in the election, suggesting
her gamble to call the vote to bolster her position in Brexit
negotiations will pay off.
Traders also remained watchful ahead of Thursday's U.S.
Senate testimony by James Comey, the former Federal Bureau of
Investigation fired by President Donald Trump in May.
Comey accused Trump on Wednesday of trying to get him to
water down the FBI probe into Russia's alleged interference in
the 2016 U.S. presidential election, according to testimony
posted on the Senate Intelligence Committee's website.
The dollar index, which tracks the greenback against
six major rivals, held steady at 96.774.
Against the yen, the dollar edged up 0.1 percent to 109.94
yen, having pulled up from Wednesday's low of 109.115
yen, the greenback's weakest level since April 21.
The yen showed little reaction to reports of missile
launches by North Korea.
North Korea fired what appeared to be several land-to-ship
missiles off its east coast on Thursday, South Korea's military
said, the latest in a fast-paced series of missile tests defying
world pressure to rein in its weapons programme.
(Reporting by Masayuki Kitano; Editing by Shri Navaratnam)