Oil prices steadied on Wednesday after falling in the previous session, as investors monitored developments in the Ukraine war and assessed an industry report showing a decline in US crude inventories.

US Special Envoy Steve Witkoff said Tuesday he would meet Ukrainian representatives in New York this week, adding that Washington is also holding talks with Russia as part of its efforts to end the war.

By 08:20 GMT, Brent crude futures slipped 4 cents to 67.18 dollars a barrel, while West Texas Intermediate (WTI) crude fell 3 cents to 63.22 dollars.

Both benchmarks had dropped more than 2% on Tuesday after starting the week at their highest levels since early August.

Oil prices found some support Wednesday from a weekly report by the American Petroleum Institute (API), which a market source said showed declines in US crude, gasoline, and distillate stocks last week. Official inventory data is due at 14:30 GMT.

Thomas Varga of PVM Oil Associates said: “The API report is helping to stabilize prices.”

In recent developments, Russian refineries came under attack from Ukrainian drones, forcing them to export crude they were unable to process.

Three informed sources said Tuesday that Russia raised its plan for crude exports from its western ports in August by 200,000 barrels per day above the initial schedule, following last week’s attacks.

The US dollar rose against the euro and British pound on Wednesday, though investor concerns about Federal Reserve independence still linger, potentially limiting the currency’s upside.

The euro fell about 0.4% to 1.1593 dollars, while the pound slipped 0.3% to 1.3441 dollars, giving back some gains made after US President Donald Trump announced Monday his plan to dismiss Fed board member Lisa Cook over alleged mortgage-related misconduct.

Cook’s attorney later said she would file a lawsuit to block her removal, setting the stage for a potentially lengthy legal battle.

Trump’s unprecedented attempt to dismiss a Fed board member adds to the ongoing pressure he has exerted on the central bank to cut interest rates since returning to the White House this year.

Although the dollar appeared to have moved past immediate concerns about Fed independence, Trump’s actions contributed to a steeper US yield curve.

Jamie Cox, managing partner at Harris Financial Group, said: “Trump has essentially taken over the Fed’s forward guidance function right now, telling markets that rate cuts are coming, which is reflected in the curve steepening.”

The two-year Treasury yield – which typically reflects near-term interest rate expectations – fell on Wednesday to 3.6540%, its lowest since May 1, as traders ramped up bets on imminent Fed easing.

In contrast, longer-term yields rose amid fears that early monetary easing could reignite inflation. The 30-year yield edged up to 4.9223%.

Lee Hardman, currency strategist at MUFG, said: “Dollar strength may reflect that market participants are still waiting for stronger confirmation from August jobs data and inflation reports on whether the Fed will go ahead with plans to resume rate cuts next month.”

Money market pricing currently shows an 87% probability of a 25-basis-point rate cut in September, according to CME FedWatch.

In Europe, political developments in France remain in focus for the euro, as Prime Minister François Bayrou seeks to save his fragile minority government.

Analysts at DBS Bank wrote in a note: “While we don’t dismiss the short-term political risks in France, we also take into account ECB President Christine Lagarde’s optimism about economic recovery and her ambition for the euro to achieve a greater international role.”

French government bonds steadied on Wednesday, after the benchmark 10-year yield jumped Tuesday to its highest level in five months. European rating agency Scope sees a government collapse in France as the most likely outcome.

Elsewhere, the US dollar rose about 0.2% against both the Japanese yen and Swiss franc, while the New Zealand dollar fell 0.4% to 0.5834 dollars.

Gold prices fell in the European market on Wednesday, giving up a two-week high reached earlier in Asian trading, as correction and profit-taking activity picked up, alongside pressure from a stronger US dollar against a basket of global currencies.

On Thursday and Friday, investors await key US economic data to reprice expectations regarding Federal Reserve rate cuts in September and October.

Price Overview

Gold fell 0.6% to 3,373.91 dollars, from the opening level of 3,393.46 dollars, after reaching a high of 3,394.25 dollars, its strongest since August 11.

At Tuesday’s settlement, gold gained 0.8%, its second daily rise in three sessions, on safe-haven demand amid concerns over Fed stability.

US Dollar

The dollar index rose 0.5% on Wednesday, resuming gains after a temporary pause yesterday, nearing its highest level in several weeks, reflecting the US currency’s rise against a basket of major and minor peers.

After the shock caused by US President Donald Trump’s attempt to dismiss Lisa Cook from her position on the Federal Reserve Board, markets were unsettled over the Fed’s independence.

However, those concerns quickly eased as it became clear the matter was likely to turn into a lengthy legal dispute, giving markets some reassurance.

US Interest Rates

According to CME Group’s FedWatch tool: the probability of a 25-basis-point Fed rate cut in September is currently steady at 87%, while the probability of no change stands at 13%.

The probability of a 25-basis-point cut in October is steady at 94%, while the probability of no change stands at 6%.

To reprice these expectations, investors await important US data, including second-quarter GDP growth and jobless claims on Thursday, and the July Personal Consumption Expenditures report on Friday.

Outlook for Gold

Kelvin Wong, market analyst for Asia-Pacific at OANDA, said: “Short-term speculators are taking some profits right now. However, gold remains supported, especially as we start to see a more cautious Fed stance.”

Wong added: “In the near term, we expect continued upward pressure, potentially testing the 3,400-dollar level, with 3,435 dollars an ounce above that.”

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 1.43 metric tons yesterday, the second consecutive daily increase, bringing the total to 959.92 metric tons, the highest since August 19.

The euro fell in the European market on Wednesday against a basket of global currencies, trading near a two-week low against the US dollar, as renewed buying of the US currency as the best available investment took hold, amid easing concerns over Federal Reserve stability.

With current odds low for the European Central Bank to cut interest rates in September—for the second consecutive meeting—investors later this week await key August inflation data from Germany and Spain.

Price Overview

The euro fell against the dollar by 0.25% to 1.1612 dollars, from the opening level of 1.1642 dollars, recording a high of 1.1647 dollars.

The euro ended Tuesday up 0.1% against the dollar, its second gain in the past three days, as part of a recovery from a two-week low of 1.1583 dollars.

US Dollar

The dollar index rose nearly 0.3% on Wednesday, resuming gains after a temporary pause yesterday, reflecting the US currency’s rise against a basket of major and minor counterparts.

After the shock caused by US President Donald Trump’s attempt to dismiss Lisa Cook from her position on the Federal Reserve Board, markets were unsettled over the future of the central bank’s independence.

However, those concerns quickly eased as it became clear the matter was likely to turn into a lengthy legal dispute, giving markets some reassurance.

European Interest Rates

Five sources told Reuters that the European Central Bank is expected to keep interest rates unchanged next month, though discussions on further cuts could resume in the autumn if the eurozone economy weakens.

ECB President Christine Lagarde said on Saturday at Jackson Hole that the tightening policies adopted in 2022 and 2023 had not led to recession or sharp increases in unemployment, as had historically been the case.

Money market pricing of a 25-basis-point ECB rate cut in September is currently steady below 30%.

To reprice these expectations, investors later this week await key inflation data from Germany and Spain for August, ahead of full eurozone inflation data early next week.