UPDATE 3-Two dead in Egypt clashes as Mursi readies speech
* Clashes in Nile Delta city leave 2 dead, 90 injured
* Mursi seeks to defuse calls for his removal
* Many fear weekend protests will lead to clashes
* Army warns it will step in if violence escalates
(Adds comment, detail, edits)
CAIRO, June 26 (Reuters) - Two people were killed and dozens injured in street fighting on Wednesday north of Cairo between supporters and opponents of Egypt's Islamist president, hours before Mohamed Mursi was to address the nation.
With Egypt gripped by fears of a showdown between Islamists and their opponents, security sources said 90 people wounded in the city of Mansoura after hundreds of men were involved in rock-throwing street skirmishes. Witnesses heard gunfire and state television showed a man in hospital with birdshot wounds.
Similar outbursts of violence, often prompted by one side or the other staging rallies, have hit towns across the country in recent days. At least two men died last weekend. The opposition plans mass protests this weekend, calling for Mursi to resign.
He shows no sign of doing that and is expected to blame the deadlock that has aggravated an economic crisis on resistance from those loyal to his ousted predecessor Hosni Mubarak.
The army has warned politicians it could effectively take charge again if they fail to reconcile. Some in the anti-Mursi camp might welcome that, but Islamists say they would fight any "coup" against Egypt's first freely elected leader.
Fears of a violent stand-off in the streets between Mursi's Islamist supporters and a broad coalition of the disaffected have led people to stock up on food. Long lines of cars outside fuel stations have snarled roads in Cairo and other cities.
Mursi, who marks his first year in office on Sunday, has given little hint of the contents of a speech due to start after 9:30 p.m. (1930 GMT) at a Cairo hall before an invited audience. Aides have indicated he will defend familiar positions, though there has been speculation he might also reshuffle his cabinet.
Some observers fear Egypt may be about to erupt again, two years after the revolution that toppled Mubarak. Politics are polarised between Mursi's disciplined Muslim Brotherhood and disparate opponents who have lost a series of elections.
The deadlock has contributed to a deepening economic crisis and the government is running out of cash.
Liberal critics worry about Islamist rule - a coalition of local human rights groups accused Mursi's Muslim Brotherhood on Wednesday of crimes rivalling Mubarak's and of setting up a "religious, totalitarian state". But many Egyptians are simply frustrated by falling living standards and fear chaos.
After the violence in Mansoura, state television put the number of injured at 160 and said rival factions were on the streets of other nearby towns in the Nile Delta as night fell. Crowds were also gathering in Cairo, in separate locations.
Lining up at a bank machine in downtown Cairo, IT trainer Amgad al-Fishawi, 40, said he feared cash could be hard to find in the coming days and echoed the resignation felt by many at the deadlock: "Mursi won't promise too much," he said. "Nobody's paying attention. The people don't expect anything from him."
The army is held in high regard by Egyptians, especially since it pushed aside Mubarak following the 2011 uprising. Its chief issued a warning on Sunday, urging compromise while also defending the legitimacy of Mursi's election.
One senior Western diplomat in Cairo said the army might try to impose a solution, especially if the political deadlock turns violent: "The margin for a political solution is definitely very narrow," he said. "If (violence) crosses a certain threshold, the role of the army might become by default more proactive."
Islamists, oppressed for decades, fear a return of military rule and hardliners warn of a fight if the generals intervene. They accuse Mubarak-era institutions, including courts, state media, police and civil service, of working to undermine Mursi.
An officer in one of Egypt's internal security agencies told Reuters this week that the country needed to be "cleansed" of the Islamists who he described as terrorists.
The army, still heavily funded by Washington as it was under Mubarak, and Western governments have been urging Mursi to bridge differences with his non-Islamist opponents. He says he has tried. They say he and his Muslim Brotherhood, along with harder line allies, are trying to monopolise the state.
Mursi says a petition demanding he quit - which liberal organisers say has 15 million signatures - is undemocratic. In that, he has support from Islamists, who have staged shows of strength in recent days and plan a major Cairo rally on Friday.
Nationwide opposition rallies are due to start on Sunday but could begin earlier.
"This demonstration is spontaneous and comes from the Egyptian people. We hope that it will bring the government ultimately to a place where the reforms are effected and choices that need to be made about the economy are implemented," U.S. Secretary of State John Kerry said on Tuesday in Saudi Arabia.
"We will obviously hope that it will not produce violence and be a moment of catalysing positive change for Egypt itself."
The opposition has low expectations of the speech which Mursi appears to be planning to make before a partisan crowd.
After dark, thousands gathered on Cairo's Tahrir Square, cradle of the 2011 uprising, and in the centre of the second city Alexandria to listen to what the president says.
Liberal coalition spokesman Khaled Dawoud likened Mursi's address to increasingly desperate speeches made by Mubarak during the revolt. He added: "It's too late for any possible measures, short of early elections, to stop the demonstrations."
At the International Crisis Group, Egypt analyst Yasser El-Shimy said he still doubted the army wanted, or would try, to take control and was more likely to push parties to compromise.
"What is going to be a game changer," he said, "is whether the violence is so massive or out of control that the government is unable to function - which might be a scenario that some are hoping for in order to prompt the military to intervene."
(Reporting by Shaimaa Fayed, Patrick Werr, Asmaa Alsharif, Tom Perry, Maggie Fick, Yasmine Saleh, Omar Fahmy, Alastair Macdonald, Alexander Dziadosz and Shadia Nasralla in Cairo; Writing by Alastair Macdonald; Editing by Peter Graff)