Dollar Stabilizes Ahead of Former FBI Director James Comey's Testimony

By Chelsey Dulaney Features Dow Jones Newswires

The euro slipped on Wednesday ahead of the European Central Bank's policy meeting, while the dollar wavered as U.S. officials faced questions about possible Russian meddling in the U.S. election.

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The euro edged 0.1% lower to $1.12605. Investors have grown optimistic that the ECB will signal a more hawkish outlook on the economy at its meeting on Thursday, but a report Wednesday indicated the central bank will revise its inflation forecast lower. That would dampen the ECB's case for unwinding quantitative easing soon and weigh on the euro.

Meanwhile, U.S. intelligence officials testifying in front of a Senate committee Wednesday are expected to face questions about alleged ties between President Donald Trump's associates and Russian officials.

That comes ahead of Thursday's testimony by former FBI Director James Comey, his first public appearance since Mr. Trump dismissed him on May 9.

Reports that President Donald Trump allegedly asked Mr. Comey to back off an investigation of former national security adviser Michael Flynn rattled the dollar as investors worry the widening investigation will derail the administration's growth-supportive agenda.

Mr. Trump has denied any attempt to intervene in the probe. Russia has denied meddling in the election, and Mr. Trump has called the investigations a "witch hunt."

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"The market's main tail-risk concern appears to be that Comey's testimony incites enough controversy to further entangle the White House in political mire and make progress towards meaningful positive fiscal and regulatory steps even slower," said analysts at Credit Suisse in a research note.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, was flat at 87.98. The index on Tuesday closed at its lowest level since Nov. 4, marking a full reversal of the postelection rally that had driven the dollar to its highest level since 2002.

The British pound rose 0.3% to $1.2951 ahead of Thursday's U.K. general election, which investors say could shape the Brexit negotiations. The pound has oscillated as polls show a tighter race than originally anticipated.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

The dollar firmed on Wednesday, a day ahead of highly-anticipated testimony from former Federal Bureau of Investigation Director James Comey, the U.K.'s general election and a European Central Bank meeting.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.1%, to 88.06. A day earlier, the index closed at its lowest level since Nov. 4.

U.S. intelligence officials began testimony in front of a Senate committee Wednesday, and several rebuffed questions about allegations that President Donald Trump tried to influence an investigation of his associates' contacts with Russia.

That comes ahead of Thursday's testimony by Mr. Comey, his first public appearance since Mr. Trump dismissed him on May 9. Written testimony by Mr. Comey, made public on Wednesday afternoon, reiterated his previous claims that Mr. Trump asked him to back off an investigation of former national security adviser Michael Flynn.

Mr. Trump has denied that he attempted to intervene in the probe. Still, the allegations have rattled the dollar as investors as worry the investigation will derail the administration's growth-supportive agenda.

"The market's main tail-risk concern appears to be that Comey's testimony incites enough controversy to further entangle the White House in political mire and make progress towards meaningful positive fiscal and regulatory steps even slower," said analysts at Credit Suisse in a research note.

Meanwhile, the euro slipped 0.2% against the dollar on Wednesday ahead of the ECB's policy meeting.

Investors have grown optimistic that the ECB will signal a more hawkish outlook on the economy at its meeting on Thursday, but a report Wednesday indicated the central bank will revise its inflation forecast lower. That would dampen the ECB's case for unwinding quantitative easing soon and weigh on the euro.

The British pound rose 0.4%, to $1.2962, ahead of Thursday's U.K. general election, which investors say could shape the Brexit negotiations. The pound has oscillated as polls show a tighter race than originally anticipated.

--Del Quentin Wilber and Byron Tau contributed to this article.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

(END) Dow Jones Newswires

June 07, 2017 17:25 ET (21:25 GMT)