The U.S. dollar strengthened against other major currencies in the European session on Wednesday, as traders await the U.S. Fed's interest rate decision later in the day.

The Fed is widely expected to leave interest rates unchanged, but traders will pay watch for the accompanying statement for clues about the outlook for rates.

Recent economic data has led to concerns about the Fed leaving rates on hold for a prolonged period, but many economists still expect the central bank to resume cutting rates sometime in the first half of the year.

CME Group's FedWatch Tool is currently indicating a 74.5 percent chance rates will be lower by at least a quarter point following the Fed's June meeting.

Traders also focus their attention on the Fed Chair Jerome Powell's press conference for any hints regarding the future direction of monetary policy.

The European Central Bank is scheduled to announce its policy on Thursday. The ECB is expected to announce a 25-basis point rate cut.

In the European trading today, the U.S. dollar rose to a 6-day high of 1.0395 against the euro and a 5-day high of 1.2412 against the pound, from early lows of 1.0444 and 1.2464, respectively. If the greenback extends its uptrend, it is likely to find resistance around 1.01 against the euro and 1.22 against the pound.

Against the yen and the Swiss franc, the greenback edged up to 155.45 and 0.9068 from early lows of 155.00 and 0.9032, respectively. On the upside, 159.00 against the yen and 0.92 against the franc are seen as the next resistance levels for the greenback.

Against Australia, the New Zealand and the Canadian dollars, the greenback advanced to 8-day highs of 0.6223, 0.5644 and 1.4434 from early lows of 0.6256, 0.5669 and 1.4392, respectively. The greenback is likely to find resistance around 0.61 against the aussie, 0.55 against the kiwi and 1.46 against the loonie.

Looking ahead, U.S. mortgage approvals data, goods trade balance for December, retail and wholesale inventories data for December and U.S. EIA crude oil data are slated for release in the New York session.

At 9:45 am ET, the Bank of Canada will announce its interest rate decision at the monetary policy meeting. The bank is expected to slash the policy rate 25bps to 3.00%.

After 45 minutes, the Bank of Canada Governor Tiff Macklem will speak at a press conference.

At 2:00 pm ET, the U.S. Federal Reserve is set to announce its first monetary policy decision of 2025. The Fed expect the federal funds rate to remain unchanged in the 4.25%-4.50% range.

Half-an-hour later, the U.S. Fed Chair Jerome Powell will speak at a press conference on future rate cuts and the Fed's economic outlook.

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