Dollar steady and London shares higher before Fed update on rates

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The dollar steadied and London shares were slightly higher in holiday-thinned trading Wednesday as investors awaited clarity on the outlook for US interest rates.

The Federal Reserve is set to keep borrowing costs on hold following a regular policy meeting that winds up later Wednesday but accompanying statements could hint at when cuts may begin, or not.

"Recent concerns around a resurgence in inflation pressures have pushed back the expected rate cuts that had until recently been scheduled to commence next month," noted Joshua Mahony, chief market analyst at Scope Markets.

The dollar, which has gained in recent days against other currencies on interest rate differentials, was largely flat Wednesday as many investors were either away for the May Day holidays or on hold ahead of the Fed's announcements.

Tuesday saw a sharp sell-off on Wall Street after fresh US data dealt another blow to hopes the Fed would reduce borrowing costs this year.

The reading on labour costs followed a string of recent reports out of Washington suggesting the Fed's battle against inflation has some way to go, even with interest rates at two-decade highs.

It has added to the angst among investors leading up to the US central bank's latest policy decision.

Markets could see deeper losses should the Fed assert "a high probability of no cuts this year, or even the open possibility of another hike", said Capital.com analyst Kyle Rodda.

With most Asian and continental European stock markets shut for May Day, London was the only major European exchange open, and the benchmark FTSE 100 stocks index was slightly higher nearing the half-way stage. New York stock markets will be open Wednesday.

Drugmaker GlaxoSmithKline was up 2 percent in London as it announced progress in final trials of promising new drugs, even as profit fell 23 percent in the first quarter.

In commodities, oil prices slid as hopes for a ceasefire in Gaza rose as top US diplomat Antony Blinken on Tuesday urged Hamas to accept a truce offer.

The Palestinian militant group said it was considering a plan for a 40-day ceasefire and the exchange of scores of hostages for larger numbers of Palestinian prisoners.

Elsewhere, bitcoin sank sharply ahead of the Fed rate decision and following a mixed reception in Hong Kong to the launch of new investment products that track the world's most popular cryptocurrency and its rival ether.

- Key figures around 1030 GMT -