FOREX-Euro slips after new high on Ukraine talks, pound jumps after BoE

By Stefano Rebaudo

Aug 7 (Reuters) - The euro edged lower after hitting a fresh 1-1/2-week high earlier in the session on Thursday as investors welcomed talks in search of a breakthrough to end the war in Ukraine.

The pound jumped after the Bank of England cut interest rates on Thursday but four of its nine policymakers - worried about high inflation - sought to keep borrowing costs on hold .

Analysts said the Monetary Policy Committee remained committed to its 'gradual and careful' approach to monetary easing, easing fears for a more hawkish approach.

Sterling was last up 0.55% at $1.3421. GBP=D3

"With four dissenters, the future descent of UK interest rates remains in doubt," said Michael Metcalfe, head of macro strategy at State Street Markets.

"The MPC’s doubters look unlikely to be assuaged any time soon unless fiscal policy gets notably more contractionary."

The U.S. dollar was flat after falling earlier in the session, amid growing concerns over partisanship creeping into key U.S. institutions.

Initial U.S. jobless claims, due later in the session, will be closely watched following last week's disappointing nonfarm payrolls report, which triggered a dovish repricing of the Federal Reserve easing path and a slide in the greenback .

The euro EUR=EBS was down 0.1% at $1.1645, after hitting $1.1688, its highest level since July 28, with a possible peace deal in Ukraine seen as a positive driver.

PRESIDENTS MEETING

Russian President Vladimir Putin and U.S. President Donald Trump will meet in the coming days, after Trump's envoy, Steve Witkoff, held talks with Putin in search of a breakthrough to end the Ukraine war.

"Sectors to benefit (from a possible peace deal) should be European consumers, growth-sensitive and construction-related sectors," said Mohit Kumar, economist at Jefferies.

"It should also be positive for Eastern Europe as most of the reconstruction efforts would likely flow through Eastern European economies."

The Swiss franc dropped 0.20% to 0.8079 versus the dollar CHF=EBS, after President Karin Keller-Sutter returned from Washington empty-handed after a trip aimed at averting a crippling 39% tariff on the country’s exports to the U.S.

"While we still believe that a deal will ultimately be reached, it is likely to be far more expensive than Switzerland had hoped," said Michael Pfister, strategist at Commerzbank.

U.S. President Donald Trump last week fired the official responsible for the labour data he did not like, and focus is centring on his nomination to fill a coming vacancy on the Fed's Board of Governors and candidates for the next chair of the central bank.

The dollar index =USD, which measures the greenback against a basket of major peers, was up 0.05% at 98.28 after hitting a new 1-1/2-week low at 97.94.

Fed funds futures are now pricing in a 91% probability of a 25 basis point cut at the Fed's September meeting, up from 48% a week ago, according to the CME Group's FedWatch Tool. In total, traders see about 60 basis points in cuts this year.

The president said on Tuesday he would decide on a nominee to replace outgoing Fed Governor Adriana Kugler by the end of the week and had separately narrowed the possible replacements for Fed Chair Jerome Powell to a short list of four.

China's yuan CNY=CFXS firmed slightly, supported by a stronger official midpoint and upbeat Chinese trade data.