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U.S. Dollar Drops Before Fed Announcement

The U.S. dollar slipped against its key counterparts in the European session on Wednesday, as investors look forward to the Federal Reserve's monetary policy decision later in the day for more hints about a reduction in interest rates this year.

The Fed is expected to hold rates steady at a target range of 2.25 - 2.50 percent.

Economists expect the bank to tweak its language to suggest the possibility for easing amid persistent trade tensions that threaten global growth.

Federal Reserve Chairman Jerome Powell will hold a news conference at 2:30 pm ET, with investors looking for signals about a rate cut in the near future.

Markets are currently placing odds of 82 percent for a 25 basis-point cut at the July meeting.

The currency was trading mixed against its major counterparts in the Asian session. While it was steady against the euro and the pound, it fell against the yen. Compared to the franc, it rose.

The greenback declined to 1.1206 against the euro, from a high of 1.1187 set at 12:45 am ET. Should the greenback falls further, 1.15 may be seen as its next support level.

Data from Destatis showed that Germany's producer price inflation slowed in May.

Producer prices climbed 1.9 percent year-on-year in May, after a 2.5 percent increase in April. Economists had expected a 2.2 percent rise.

After rising to more than a 2-week high of 1.0015 against the franc at 9:45 pm ET, the greenback pulled back to 0.9976. The next possible support for the greenback is seen around the 0.97 level.

The greenback reached as low as 108.24 against the Japanese yen, following an advance to 108.62 at 8:30 pm ET. On the downside, 106.00 is possibly seen as the next support level for the greenback.

The greenback slipped to a 2-day low of 1.2587 against the pound, reversing from a high of 1.2543 marked at 3:15 am ET. If the greenback falls further, 1.27 is likely seen as its next possible support level.

Data from the Office for National Statistics showed that UK inflation slowed to the central bank target in May, as widely expected.

Consumer price inflation came in at 2 percent in May versus 2.1 percent in April. The rate matched expectations.

In contrast, the U.S. currency was holding steady against the loonie with the pair trading at 1.3375. This follows a 5-day low of 1.3365 set at 8:00 pm ET.

The greenback edged up to 0.6520 against the kiwi and 0.6868 against the aussie, from its early 5-day lows of 0.6539 and 0.6886, respectively. The greenback is seen finding resistance around 0.63 against the kiwi and 0.66 against the aussie.

Looking ahead, Canada consumer inflation for May is due in the New York session.

European Central Bank President Mario Draghi will give closing remarks at the ECB Forum on Central Banking in Sintra at 10:00 am ET.

At 2:00 pm ET, the Fed announces its decision on interest rate. Economists widely expect it to keep federal funds rate at 2.25 - 2.50 percent.

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