The greenback fell against other major currencies on Wednesday after the Federal Reserve cut interest rates by 0.25 percent, from 2.25% to 2.0 percent. Although the move was widely expected, the accompanying statement was not as hawkish as most traders anticipated, which caused dealers to cover their long dollar positions, leading to the euro, Japanese yen and British pound all surging in late New York trading.

Most investors had expected the Federal Open Market Committee (FOMC) to lower interest rates by 25 basis points and would also indicate to the market that Fed's easing cycle, which started in mid-September 2007, is coming to an end after this rate cut. However, the statement accompanying the rate decision did not sound as hawkish as anticipated and it was interpreted as more to the dovish side. Although the committee removed the reference of 'downside risks to growth', the statement reaffirmed that the Fed may still cut interest rates in the future by saying it 'will act as needed to promote sustainable economic growth and price stability'. The statement also indicated that stressed financial markets, tight credit conditions and the housing contraction 'are likely to weigh on economic growth over the next few quarters'.

Although the single currency posted its biggest monthly decline against the dollar in April since May 2007, euro jumped after the Fed rate announcement to a high of 1.5644, the Japanese yen also rebounded sharply to 103.75 in afternoon U.S. session. Cable rallied to an intra-day high of 1.9895 on active cross-buying in sterling.

On the data front, U.S. Q1 GDP came in better than expected at 0.6% (vs forecast of 0.5%), job growth in the private-sector this month also showed a surprisingly strong number at +10,000 with most economists expecting a much worse number at -60,000. On the other hand, Chicago PMI which measure the business activity in Midwest of U.S. stayed below 50 for a third consecutive month in April at 48.3.

On Thursday, most markets in Asian and European countries are closed for Labour Day holiday but Japan n U.K. are still open. Economic releases include U.K. manufacturing PMI, U.S. PCI core, jobless claims, construction spending and ISM manufacturing index.