July 25, 2018 / 11:19 AM / 9 months ago

FOREX-Euro inches up ahead of Trump-Juncker talks

* Major currencies hemmed into tight ranges

* Market focused on Washington visit of EC president

* Aussie drops on weak inflation figures

* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh (Adds quote, updates figures)

By Tom Finn

LONDON, July 25 (Reuters) - The euro edged higher on Wednesday ahead of a meeting between U.S. President Donald Trump and European Commission President Jean-Claude Juncker but gains were limited with investors cautious about a trade rift between the two powers.

Lack of clarity over where a brewing U.S.-European trade conflict is heading kept most major currencies, including the dollar, range-bound on Wednesday as Juncker travelled to Washington for trade-focused talks with Trump.

The talks come after the United States imposed tariffs on European Union steel and aluminium, and Trump’s threats to extend those measures to EU-made cars.

“Risks remain tilted to the continuation of the tough rhetoric by the U.S. president,” said Chris Turner, head of currency strategy at ING in London.

“Given that the risk of auto tariffs is a well-known threat, any major breakthrough today may not be enough to materially affect risk appetite. We look for the FX markets to remain stable today.”

The single currency was up 0.1 percent at $1.1694. The dollar versus a basket of major currencies traded broadly flat at 94.52.

Some are puzzled at how little the impending U.S. tariffs have budged the euro.

“The euro continues to stagnate in a sideways range despite the risk of a trade war becoming increasingly obvious,” said Commerzbank currency strategist Ulrich Leuchtmann in Frankfurt.

“But FX markets cannot ignore economic realities for long... The next trend will come. The only question is when.”

Trump reinforced his criticism last week of the Federal Reserve’s policy on raising interest rates, saying it could hurt the U.S. economy.

Trump also accused the EU and China of manipulating their currencies, ignoring a custom that U.S. presidents avoid openly interfering in financial markets.

“Short-term traders had to take notice of Trump’s comments but other countries did not take the bait. The dollar is fairly stable. There is no currency war,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note.

Investors were also eyeing a European Central Bank (ECB) policy meeting on Thursday for direction.

The ECB guided markets for steady rates “through the summer” of 2019 at a meeting last month, when it also announced it would shut its signatory bond-purchasing programme in December.

Against the yen, the dollar was flat at 111.12 yen per dollar.

The yen found some support early this week on expectations the Bank of Japan might be a step closer to scaling back some of its aggressive monetary stimulus.

The Australian dollar slumped after data on Wednesday showed inflation remained stubbornly low last quarter despite fairly robust economic growth. It traded 0.1 percent lower at $0.7414.

Risk appetites remained mostly firm, supported by strong U.S. corporate earnings and hopes that China will boost fiscal support for its economy.

The offshore yuan strengthened half a percent to 6.7905 per dollar. (Editing by Mark Heinrich)

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