LONDON—Both the euro and the dollar came under pressure Wednesday as investors ran scared ahead of Federal Reserve Chairman Ben Bernanke's testimony to Congress Wednesday and Thursday and the results of the European bank stress tests on Friday.
The pound, which was knocked down earlier in the day reportedly by a trading error, largely recovered but then got hit again slightly by the latest Bank of England minutes.
The euro had fallen to $1.2857 from $1.2887 late Tuesday in New York, according to EBS. The single currency also fell to 111.89 yen from 112.60 yen while the dollar was down at 87.01 yen from 87.38 yen.
The dollar was also down at 1.0519 Swiss francs from 1.0531 Swiss francs while the pound, which was knocked as low as $1.5166 at the start by a trading mistake, recovered to $1.5278. This was slightly higher from $1.5275 late Tuesday. On the one hand, the Bank of England minutes reassured markets that another rate increase isn't likely in the near-term. But the minutes also hinted at the downside growth risks for the U.K. economy and helped to undermine the pound.
Given the recent slowdown in U.S. economic data, Mr. Bernanke is widely expected to pave the way for a second round of quantitative easing in the U.S. when he stands up in front of the Senate Banking Panel at 6 p.m. GMT.
Fears of this bearish outlook has already driven short-term Treasury yields lower and the dollar has weakened in recent days.
However, U.S. equities, a key barometer of global risk appetite, have risen over the last week or so as second quarter earnings have proved better than expected in most cases.
This dichotomy is making it difficult to predict how the dollar will react to Mr. Bernanke.
For the euro, meanwhile, the uncertainty is all about the results of the stress tests for major European banks and whether the criteria for the tests themselves will prove credible enough to convince markets that they will be able to weather the slowdown that is coming over the next couple of years.
