* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* ECB, Italy bank rescue, UK election, ex-FBI grilling in focus
* European stocks inch up 0.1 pct, euro, pound flat
* Dollar recovers from knock by yen ahead of Comey testimony
* Oil steadies, Qatar bonds extend falls after S&P downgrade
By Marc Jones
LONDON, June 8 (Reuters) - European stocks inched higher and the euro and the pound barely budged, as markets readied for a triple-dose of excitement - an ECB meeting, a British election and testimony by the ex-FBI chief fired by Donald Trump last month.
Much has been made of the ‘Triple Threat Thursday’ but beyond the commentary on the outside risks from those events it was hard to see any real trepidation in prices.
Stock markets in London, Frankfurt and Paris were flat to 0.2 percent higher helped by reports of another bank rescue, this time in Italy, and energy shares as oil steadied after 5 percent drop the previous day.
Italy’s bonds cheered the banking sector talk and the pound and the euro were at $1.2972 and $1.1259 respectively, the former near a two-week high and the latter just off a seven-month high.
The dollar was also in a holding pattern. The yen had landed a glancing blow overnight after stimulus withdrawal talk from a Bank of Japan policymaker, but the greenback had all but recovered as focus returned to the day’s main events.
Former FBI Director James Comey’s will be grilled by Washington politicians later over his claims that President Trump asked him to drop an investigation of former national security adviser Michael Flynn as part of a probe into Russia’s alleged meddling in the 2016 presidential election.
Although it keeps pressure on Trump, Wall St markets largely shrugged it off after Wednesday’s written testimony as not toxic enough to ratchet up the threat of an impeachment.
“To be honest I‘m absolutely staggered about the degree to which this geopolitical environment and developments are having absolutely no effect on markets,” said Saxo Bank head of FX strategy John Hardy.
“I‘m old enough to remember how nervous the market used to get about this kind of stuff back in the day. I admit I don’t know how to price it, but it’s really staggering.”
With the VIX implied volatility index, the markets’ so called ‘fear gauge’ hovering just above 10 percent, similar arguments are being made about the UK election and the ECB policy meeting later.
For all the scenarios of a hung-parliament or Labour-led coalition, the central assumption is for a slightly increased majority for the ruling Conservatives and averaging the very diverse opinion poll projections points to the same.
Spot sterling has been firm in recent days, although the jump in overnight implied volatility readings to some 30 percent – its highest since July – at least shows some pricing of possible risks over the next 24 hours.
As for the ECB, soundings on downgraded inflation forecasts and background trepidation about banking sector stability make it highly unlikely it will signal any major tightening of policy ahead later.
“We expect the ECB to tweak its forward guidance by dropping the easing bias on interest rates, while leaving the rest of its guidance largely unchanged, including the easing bias on asset purchases,” UniCredit said in a note.
The biggest moves of the week so far remain centred around ebbing energy prices and inflation outlooks in general.
Brent crude stabilized at $48.50 a barrel in European trading, after another steep drop briefly below $48 overnight. It is now down more than 7 percent year-on-year.
With inventories showing no easing of the global glut, an ongoing row between Qatar and its Arab neighbours is seen as undermining the OPEC consensus about production cuts to limit oil supply.
Financially, the isolation of Qatar is taking its toll on the country’s debt and currency markets. Standard & Poor’s downgraded Qatar’s debt on Wednesday and Moody’s warned on Thursday that it saw risks too if the situation continued.
The riyal currency fell to an 11-year low and Qatari sovereign dollar bonds also extended losses of recent days. The cost of insuring exposure to the kingdom’s debt rose to the highest level since mid-November.
“We expect that economic growth will slow, not just through reduced regional trade, but as corporate profitability is damaged because regional demand is cut off, investment is hampered, and investment confidence wanes,” S&P said.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Reporting by Marc Jones; Editing by Toby Chopra)