A day after St. Louis Fed President James Bullard's comments that a rate cut may be needed soon, Fed Chair Jerome Powell said that the Fed will act as appropriate to sustain the expansion. The possibility of an interest rate cut kept the USD bulls on the defensive.

USD/JPY pair struggled near 4-1/2-month lows on overall US Dollar weakness, while GBP/USD remained on recovery mode, however dropped below 1.2700 mark. EUR/USD was propped by US Dollar selling pressure and stayed close to the 100-day SMA at 1.1275.

In today’s calendar, final services PMIs in Euroland for the month of May are unlikely to move the dial in the markets, although investors would be more interested in the publication of Producer Prices during last month and the performance of Retail Sales in April. In the UK, in addition to political developments surrounding the race to next UK PM and the US President Donald Trump’s British visit, May month Markit services PMI will be the key to forecast fresh moves.

Moving ahead in Wednesday's US economic docket, the release of ADP report on private sector employment and the ISM non-manufacturing PMI, will now be looked upon for some short-term trading opportunities later during the early North-American session.

Oil prices resumed their slide on Wednesday, dragged down by a surprise gain in U.S. inventories and comments from the head of Russian state oil producer Rosneft questioning the point of a deal with OPEC to withhold supplies.

Gold surged to 3-1/2-month tops, around $1,335 level in the last hour, as the increasing Fed rate cut bets continued to benefit the precious metal. Adding to this, the prevailing cautions mood around equity markets further underpinned the precious metal's relative safe-haven status and contributed to the ongoing positive momentum through the early European session.