Dollar off 3-week low, European shares flat before Bernanke testimony

 

The dollar steadied after climbing off a three-week low and stock markets were in a holding pattern on Wednesday, as investors awaited fresh clues on how the US Federal Reserve plans to scale back its stimulus programme.

 

After a quiet day in Asia, Europe's broad FTSEurofirst 300 share index inched up 0.1%, as London's FTSE, Frankfurt's DAX and Paris's CAC 40 all clawed back some of Tuesday's minor falls.

 

Focus was squarely on a testimony to US congress later by Fed Chairman Ben Bernanke. He is expected to use the appearance to calm market worries about life without the central bank's $85-billion-a-month bond-buying programme.

 

The dollar was steady as European trading gathered pace having climbed off a three-week low overnight. Investors were wary of being long the dollar after Bernanke last week caused a shakeout of positions with comments that were considered unexpectedly dovish.

 

"The market was quite long of dollars then it got that shock," said head of FX at Saxo Bank John Hardy. "A very dovish outcome from the testimony could see some short-term dollar weakness but it could turn around pretty quickly, so we'll see."

 

European markets were also eyeing the minutes from Mark Carney's first meeting in charge of the Bank of England, due for release at 0830 GMT. UK unemployment data is out at same time.

 

Benchmark UK gilts and German Bund futures were both keeping to tight ranges and investors waited on the sidelines. Bunds were 10 ticks higher on the day at 143.79. The market also absorbs German 10-year bonds later.