Forex Today: Markets gear up for first 50 bps Fed rate hike since 2000

Here is what you need to know on Wednesday, May 4:

Following Tuesday's choppy action, markets remain calm early Wednesday as investors move to the sidelines ahead of the US Federal Reserve's policy announcements. The US Dollar Index continues to move sideways near 103.50 and the 10-year US T-bond yield fluctuates in a tight range below 3%. The European economic docket will feature March Retail Sales data for the eurozone. April ADP Employment Change and ISM Services PMI from the US will be looked upon for fresh impetus in the early American session. 

ADP Employment Change April Preview: Will employment threaten Fed rate hikes?

European Commission President Ursula von der Leyen said early Wednesday that they will phase out the Russian supply of crude oil and refined products by the end of the year. Von der Leyen further added that Sberbank and other major Russian banks will be excluded from the SWIFT system as part of the latest sanctions package.

The Fed is widely expected to hike its policy rate by 50 basis points and unveil its plan for balance sheet reduction. FOMC Chairman Jerome Powell will deliver his remarks on the policy and the economic outlook at a press conference at 1830 GMT. 

Federal Reserve Preview: Buy the dollar dip and three other scenarios as Powell shows his power.

In the meantime, Beijing announced earlier in the day that they shut more than 40 metro stations and 158 bus routes to limit the spread of the virus. Additionally, Zhengzhou said that it will start enforcing strict coronavirus restrictions from next week. Meanwhile, Reserve Bank of New Zealand Governor Adrian Orr said earlier in the day that they cannot rule out a global recession in the coming months. Nevertheless, US stock index futures post small gains in the early European session but the market mood is likely to remain cautious ahead of the Fed event.

EUR/USD continues to fluctuate above 1.0500 on Wednesday but stays on the back foot with the Euro Stoxx 600 Index losing nearly 0.5% in the early European session.

GBP/USD staged a rebound on Tuesday but erased its daily gains after having met resistance at 1.2570. The pair was last seen moving sideways near 1.2500.

Gold is edging higher toward $1,870 Wednesday morning but struggles to gather bullish momentum as US T-bond yields remain steady.

USD/JPY is moving in an extremely narrow trading band near 130.00 for the third straight day on Wednesday.

Bitcoin is up more than 2% early Wednesday but continues to trade below the key $40,000 level. After having lost nearly 3% on Tuesday, Ethereum has regained its traction and was last seen rising 1.5% on the day at $2,820.