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Forex outlook:

The dollar was steady against the euro and the yen before the interest-rate decision from the Federal Reserve and a report forecast to show an expanding U.S. economy. The U.S. currency traded near a four-year high versus the yen as investors cut bets the Fed will lower its key interest rate by July amid signs of faster growth. The dollar also traded near a two-week high against the euro after a report showed consumer confidence rose to 110.3 in January the highest in almost five years.

The euro was trading at $1.2958, little changed on the day. Positions in the dollar and euro are relatively small, according to JPMorgan’s proprietary flow data, further suggesting big shifts are unlikely ahead of U.S. fourth quarter growth.

The pound rebounded from a two-week low after the National Institute of Economic and Social Research said economic expansion in the U.K. is picking up and one more interest-rate increase is needed to contain inflation. The U.K. currency is also benefiting from a practice known as the carry trade. Investors borrow at relatively low interest rates in Switzerland or Japan and buy higher-yielding assets abroad to earn the interest rate premium. The BOE's benchmark rate is 5 percentage points higher than Japan's main interest rate and is 3.25 percentage points above the Swiss National Bank's key cost of borrowing.

Markets will focus on the statement that accompanies the Fed’s decision to see what it suggests for future rate moves. The dollar would likely get a boost if the Fed sounds a more optimistic note on the economy after raft of strong U.S. data. According to the forecast, Fed will most likely keep interest rates unchanged at 5.25 percent today. Moreover, the U.S. GDP report today may say the world's largest economy grew at an annual rate of 3 percent in the fourth quarter, compared with 2 percent during the previous three months.

Gold: Gold prices rose on speculation higher energy costs will boost the appeal of the precious metal as an inflation hedge. However, investors were cautious as they awaited the Fed rate decision and comments on U.S. inflation ahead of key economic data due later this week. Dealers remained confident about gold’s long-term prospects.

Crude Oil: Crude oil surged to its biggest gain in 16 months on speculation that colder weather and an improving economy will spur U.S. fuel consumption. Crude oil jumped more than 5 percent on Tuesday to $56.97 a barrel. The surge was fueled by a rush of buying by funds ahead of a fresh OPEC output cut. OPEC producers were set to reduce supply to world markets by 500,000 barrels per day from 1 Feb, and Nigerian oil Minister Edmund Daukoru said most of the group agreed the cuts should be fully implemented before new measures are taken. The EIA report today is expected to show that U.S. crude oil rose 1.1 million barrels last week.

Pool position: