LONDON, June 26 Reuters The pound dipped on Wednesday as the dollar strengthened while investors waited for the release of the Federal Reserve39;s preferred gauge of inflation on Friday.

Sterling was last 0.2 lower at 1.2661, around where it has traded for the last two weeks.

The euro was down 0.1 against the pound at 84.37 pence after falling to a twoyear low of 84.40 pence on June 14 after French President Emmanuel Macron39;s decision to call a snap parliamentary election rocked Europe39;s markets.

U.S. personal consumption expenditure inflation data, due on Friday, will guide Fed policy and could lead to swings in currency markets.

The pound has been one of the best performers this year, down just 0.4 against the dollar, compared with a 3 fall for the euro and 13 drop for the yen.

Britain39;s relatively high services and wage inflation means traders expect the Bank of England to cut rates just once or twice this year. That has kept upward pressure on bond yields, making them attractive to many investors and thereby supporting the pound.

Expectations that the Labour party will win a huge majority in the July 4 general election and bring some longabsent stability to British policymaking has also been supporting sterling.

Yet economists and investors say there are risks to British financial markets from a Labour party that has been coy about its exact plans for taxing and spending.

With fiscal responsibility, everything that Labour is doing is the polar opposite…