Oil prices fell on Wednesday after gaining more than 1% in the previous session, though losses were limited by ongoing geopolitical tensions, while traders awaited an expected interest rate cut from the U.S. Federal Reserve later in the day.

Brent crude futures dropped 62 cents, or 0.9%, to $67.85 a barrel by 10:42 GMT, while U.S. West Texas Intermediate (WTI) crude slipped 63 cents, or around 1%, to $63.89 a barrel.

Both benchmarks had settled more than 1% higher on Tuesday, supported by concerns over potential disruptions to Russian supply after Ukrainian drone strikes on ports and refineries. Reuters cited three industry sources saying Transneft, Russia’s pipeline monopoly, warned producers they may be forced to reduce output due to infrastructure damage.

John Evans, analyst at PVM Oil Associates, said: “If the drone damage to Russian infrastructure proves short-lived, then the recent $5-a-barrel trading range is likely to hold.”

He added that with current sanctions and rising OPEC supply, “the only real hope for higher prices lies in a shortage of distillates as winter approaches.”

Moscow: EU Plans Will Not Impact Russia

Kremlin spokesman Dmitry Peskov said Wednesday that European Union plans to accelerate the phase-out of Russian energy and commodities would not affect Moscow.

Despite sanctions, Europe still imports billions of euros’ worth of Russian energy and goods — from liquefied natural gas to enriched uranium — though its purchases of Russian oil and gas have fallen sharply.

At the same time, investors are awaiting the outcome of the Federal Reserve’s September 16–17 meeting, where newly appointed Governor Stephen Miran, selected by the Trump administration, joins the deliberations. While markets have already priced in a 25-basis-point cut, attention is firmly on Fed Chair Jerome Powell’s guidance on the future policy path.

Separately, preliminary data from the American Petroleum Institute showed U.S. crude and gasoline stocks fell last week, while distillate inventories rose. The market now awaits official figures from the Energy Information Administration, with a Reuters poll of nine analysts forecasting a drop in crude inventories but increases in gasoline and distillates.

Chris Beauchamp, chief market analyst at IG Group, said: “The market looks at a crossroads over whether the recent oil rebound can continue, with reports of major funds building heavy short positions reflecting ongoing oversupply fears. That could make gains harder to sustain.”

He added that Russia’s continued testing of NATO’s resolve may keep tensions in check, putting further downward pressure on prices and making a retest of recent lows more likely.

The U.S. dollar rose on Wednesday as investors awaited whether Federal Reserve Chair Jerome Powell would endorse market expectations for a dovish policy path during his press conference later in the day.

On Tuesday, the dollar had fallen to a four-year low against the euro, with markets focused on the Fed meeting, where a 25-basis-point rate cut is widely expected.

Markets are currently pricing in about 68 basis points of easing by year-end and a total of 147 basis points by the end of 2026. Attention is also on whether policymakers discussed a larger 50-basis-point cut, at a time when President Donald Trump continues to push for a structural reshaping of the U.S. economy, raising concerns over the central bank’s independence.

The euro fell by 0.25% to 1.1838$, after reaching 1.18785$ on Tuesday, its highest in four years. The pound declined 0.13% to 1.3630$, though it remained near a two-and-a-half-month high after U.K. inflation data matched expectations.

Thierry Wizman, global currency and rates strategist at Macquarie Group, said: “Powell will keep the balance. He will reiterate downside risks to job growth, but refrain from signaling a long series of cuts beyond September.”

He added that this stance could support the dollar, weigh on gold, and shake up the trajectory of tech stocks.

The dollar index, which measures the U.S. currency against six major peers, rose 0.20% to 96.84 after hitting 96.554 on Tuesday, its lowest since early July. Still, the index remains down about 11% year-to-date, with expectations of further losses after a temporary pause.

Laura Cooper, senior macro strategist at Nuveen, said: “With six rate cuts priced in over the next year, the real story is not about the size of this week’s move but about how Powell maps out the policy path.”

She added that “an aggressive cut could derail the risk rally in the short term.”

Yen in focus

The Fed began its two-day meeting on Tuesday with a new administration-appointed member participating after being granted leave to join the deliberations, while another member faced Trump’s efforts to oust her. A federal appeals court on Monday blocked the dismissal of Governor Lisa Cook, allowing the Biden appointee to take part fully in this week’s policy meeting.

Tuesday’s data showed U.S. retail sales rose more than expected, but labor market weakness and rising prices pose risks to the durability of spending.

The Swiss franc fell 0.22% to 0.7875 per dollar, near a decade high of 0.7857. The Australian dollar touched an 11-month high at 0.6674$.

The yen rose to 146.22 against the dollar, its strongest in a month, ahead of Friday’s Bank of Japan meeting where rates are expected to remain unchanged, before easing slightly to 146.63.

Focus is also turning to the October 4 vote, when the ruling Liberal Democratic Party will choose a successor to outgoing Prime Minister Shigeru Ishiba.

Chris Turner, head of FX strategy at ING, said: “The yen’s strength against the dollar may reflect Shinjiro Koizumi’s entry into the leadership race against Sanae Takaichi, whose support for loose monetary and fiscal policies is seen as negative for the yen.”

Gold prices fell in the European market on Wednesday for the first time in four days, retreating from their all-time highs, pressured by profit-taking activity and a rebound in the U.S. dollar against a basket of major currencies.

The Federal Reserve will conclude later today its sixth policy meeting of 2025 to discuss appropriate monetary policy for the world’s largest economy, with expectations pointing to a 25-basis-point interest rate cut.

Price Overview

• Gold prices today: gold declined by 0.75% to (3,662.69$), from an opening level of (3,690.06$), after recording an intraday high of (3,695.40$).

• At Tuesday’s settlement, gold prices rose by 0.3%, marking a third consecutive daily gain, and reached an all-time high of 3,703.30$ an ounce.

U.S. Dollar

The dollar index rose on Wednesday by 0.2%, holding above a ten-week low at 96.56 points, reflecting a rebound in the U.S. currency against a basket of peers, which in turn weighed negatively on gold and other dollar-denominated commodities.

Beyond low-level buying, this rebound comes as investors paused from building fresh short positions while awaiting the outcome of the Fed’s critical policy meeting.

Federal Reserve

The Federal Reserve will conclude later today its sixth scheduled meeting of 2025 to set appropriate monetary policy for the U.S. economy, with expectations of a 25-basis-point cut — the first U.S. interest rate reduction since December 2024.

The policy decision, along with the monetary policy statement and updated economic projections, is due at 19:00 GMT, followed by Fed Chair Jerome Powell’s press conference at 19:30 GMT.

The data and remarks are expected to provide stronger guidance on whether additional rate cuts will be delivered later this year, particularly amid ongoing pressure from President Donald Trump for deeper easing to cushion housing-sector risks.

U.S. Interest Rates

• According to CME Group’s FedWatch tool: market pricing for a 25-basis-point cut at this week’s meeting remains at 100%, while odds of a 50-basis-point cut stand at 4%.

• For October, the probability of a 25-basis-point cut is also fully priced at 100%, with 50-basis-point odds steady at 3%.

Outlook for Gold

Tim Waterer, chief market analyst at KCM Trade, said gold’s rally to the 3,700$ level was supported by dollar weakness alongside bets that the Fed may signal further easing before year-end.

He added that profit-taking near the 3,700$ mark pulled the metal back below that level, but if the Fed adopts a strongly dovish stance at this meeting, gold could attempt another push toward fresh record highs.

SPDR Gold Trust

Holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 3.14 metric tons on Tuesday, marking a second consecutive daily increase, bringing the total to 979.95 metric tons — the highest in about a week.

The British pound edged lower in the European market on Wednesday against a basket of global currencies, giving up its highest level in ten weeks against the U.S. dollar, due to correction and profit-taking activity, coinciding with the U.S. currency holding steady ahead of the Federal Reserve’s policy decisions.

The Bank of England meets tomorrow, Thursday, to discuss monetary policy tools appropriate for the developments in the U.K. economy, with full expectations that British interest rates will remain unchanged.

To reprice the probabilities of a British rate cut during the remainder of this year, investors are awaiting the release later today of key U.K. inflation data.

Price Overview

• GBP exchange rate today: the pound fell against the dollar by 0.1% to (1.3639$), from today’s opening price of (1.3652$), recording a high of (1.3660$).

• On Tuesday, the pound rose by 0.35% against the dollar, marking a second consecutive daily gain, and reached its highest level in ten weeks at 1.3672$, supported by the decline in the dollar and U.S. yields.

U.S. Dollar

The dollar index rose on Wednesday by less than 0.1%, holding above a ten-week low at 96.56 points, reflecting a slight rebound in the U.S. currency against a basket of global peers.

In addition to buying activity from low levels, this rebound comes as investors pause from building new short positions while awaiting the results of the crucial Federal Reserve policy meeting.

The U.S. central bank is expected to cut interest rates by only 25 basis points, despite continued pressure from Donald Trump on U.S. monetary policymakers to implement deeper cuts to address risks in the housing market.

British Interest Rates

• Following mixed labor market data from the U.K. on Tuesday, market pricing for a 25 basis point rate cut by the Bank of England at Thursday’s meeting remains below 20%.

• The Bank of England meets tomorrow to discuss monetary policy in light of recent U.K. economic developments, particularly growing concerns about financial stability.

• The vote on cutting British interest rates during the August meeting revealed clear division among members over the path of monetary easing.

U.K. Inflation Data

To reprice the existing probabilities regarding British interest rates, investors are awaiting the release later today of U.K. inflation data for August, which is expected to strongly influence the Bank of England’s policy path.

At 07:00 GMT, the consumer price index is expected to rise by 3.9% year-on-year in August, compared with a 3.8% increase in July. The core CPI is expected to rise by 3.7% year-on-year, down from 3.8% in the previous month.

Outlook for the Pound

At Economies.com we expect: if U.K. inflation data comes in higher than market forecasts, the probability of a British interest rate cut before the end of this year will decline, which would push the pound to higher levels against the U.S. dollar, reaching fresh multi-month highs.