The dollar surrendered some ground heading against the pound and euro, with the latter looking set to end a six-day winning streak as attention turns to the US Federal Reserve's decision later on Wednesday.

The euro traded at USD1.1066 on Wednesday afternoon UK time, up from USD1.1049 on Tuesday. The pound climbed to USD1.2906 from USD1.2825.

"The language used by the Fed will go a long way towards determining whether the USD downtrend resumes," KCM Trade analyst Tim Waterer commented.

"It will all come down to the messaging from the Fed regarding where they see rates going from here."

The Fed decision is announced at 1900 BST, with a press conference with Chair Jerome Powell half an hour later.

Against the Swiss franc, the dollar slipped to CHF0.8626 from CHF0.8685. Versus the yen, the dollar faded to JPY140.35 from JPY141.33.

Versus the euro, the pound climbed to EUR1.1659 on Wednesday afternoon in London, from EUR1.1613 on Tuesday.

All eyes will be on the forward guidance at Thursday's European Central Bank decision, as recent stark economic data is sure to have tested the central bank's mettle in its fight against inflation.

The ECB will announce its monetary policy decision at 1315 BST on Thursday. A press conference with President Christine Lagarde will follow at 1330 BST.

The bank is widely expected to enact a 25 basis point hike to interest rates. In June, it had lifted rates by 25bp, as had been expected.

The decision by the ECB Governing Council took the interest rate on the main refinancing operations, the marginal lending facility and the deposit facility to 4.00%, 4.25% and 3.50%, respectively.