The dollar was on the defensive, shares edged lower, and gold scaled new heights on Wednesday as global markets counted down to an anticipated rate cut by the Federal Reserve later in the day and waited on signals around the extent of future easing.

The euro surged to a four-year high against the greenback in the prior session on the Fed easing bets, while oil remained firm following Ukrainian drone attacks on Russian refineries and ports.

The Fed is expected to cut its benchmark interest rate by a quarter of a percentage point to the 4.00%-4.25% range at the end of its monetary policy meeting later in the global day. The main focus beyond the rate decision will be on Chair Jerome Powell's comments on the outlook for U.S. monetary policy.

"Markets are effectively daring the Fed to over-deliver on the dovish side," said Dilin Wu, research strategist at Pepperstone. "The bigger question, though, is whether Powell can satisfy markets already leaning heavily on a dovish view, or whether conditions are ripe for a near-term shakeout in both USD and gold positioning."

The dollar index , which tracks the greenback against a basket of currencies of other major trading partners, edged up 0.1% to 96.689 after a 0.7% slide on Tuesday to the lowest since early July.

The European single currency was down 0.1% at $1.1857, after touching $1.1867 on Tuesday, its highest level since September 2021. The dollar was little changed at 146.52 yen following a 0.6% slide in the previous session.

"If the (Fed) chair is more dovish than expected, of course, you would expect that to weigh on the dollar, but really, how much more bearish can you get from here?" Mahjabeen Zaman, the head of foreign exchange research at ANZ, said on a podcast. "We've already got more than five cuts priced in for the cycle."

Stephen Miran was sworn into his Fed position on Tuesday morning, after the U.S. Senate narrowly confirmed him to the central bank's Board of Governors ahead of its policy meeting. A U.S. appeals court separately declined to let President Donald Trump fire Fed Governor Lisa Cook.

Source: Reuters.com