The U.S. dollar slipped against its major counterparts during the European session on Wednesday, ahead of the U.S. Federal Reserve's monetary policy decision that is expected to deliver another 50 basis point rate hike to counter inflation.

The Fed has started its policy meeting on Tuesday and will conclude at 2 pm ET.

Although economists largely expect a 50 basis point hike, the possibility of a 75 basis point move has intensified after Friday's higher-than-expected consumer inflation data for May.

U.S. treasury yields retreated before the Fed decision, with the benchmark 10-year yield touching 3.389 percent.

On the economic data front, U.S. retail sales and import and export prices for May are due at 8:30 am ET.

The greenback weakened to a 2-day low of 1.0508 against the euro from Tuesday's close of 1.0415. The greenback is likely to challenge support around the 1.07 level.

The greenback dropped to 0.9961 against the franc and 1.2103 against the pound from yesterday's closing values of 1.0016 and 1.1996, respectively. The greenback may locate support around 0.96 against the franc and 1.26 against the pound.

The greenback fell to 134.30 against the yen, after hitting a 23-1/2-year high of 135.59 at 5:45 pm ET. On the downside, 119.00 is possibly seen as its next support level.

The greenback declined to 0.6945 against the aussie and 0.6255 against the kiwi, compared to yesterday's closing quotes of 0.6869 and 0.6213, respectively. The next possible support for the greenback is seen around 0.72 against the aussie and 0.66 against the kiwi.

The greenback was down against the loonie, at 1.2916. The greenback traded at 1.2944 against the loonie at yesterday's close. If the greenback falls further, it may find support around the 1.24 level.

Looking ahead, Canada housing starts for May are scheduled for release at 8:15 am ET.

U.S. import and export prices and retail sales for May, business inventories for April and New York Fed's empire manufacturing survey and NAHB housing market index for June will be featured in the New York session.

At 2:00 pm ET, the Fed announces its decision on interest rate. Economists widely expect the Fed to raise rates by 50 basis points to 1.5 percent.

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