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· The Canadian and Australian dollar sank to two-month lows on Wednesday as traders scaled back holdings on expectations policy-makers would leave interest rates alone in the foreseeable future or even lower them to counter their softening economies.

The Bank of Canada said on Wednesday there was "increased uncertainty" about the timing of future rate hikes as it held interest rates steady as expected. Australia said its economy grew at a 0.2 percent pace in the fourth quarter of 2018, falling short of the 0.3 percent forecast by analysts polled by Reuters.

The dour GDP figure came a day after the Reserve Bank of Australia's upbeat outlook failed to dispel bets it would have to lower rates eventually.

The Canadian dollar fell to C$1.3457 after the release of the BOC's latest policy statement, its lowest against its U.S. counterpart since Jan. 4. At 3:20 p.m. EST, it was 0.55 percent weaker at C$1.3424.

The Aussie dollar was $0.7028, down 0.76 percent on the day after hitting $0.7021, a two-month low.

· The greenback held steady against most major currencies after the Federal Reserve released its latest Beige Book, which showed tariffs and a record 35-day partial government shutdown were drags on the U.S. economy in early 2019.

· While the Fed took a dovish turn of its own in late January, the dollar has been supported by the relative wide differentials between U.S. bond yields and the yields of most developed economies, analysts said.

For example, benchmark 10-year Treasury yields were about 256 basis points higher than those on 10-year German Bunds.

· Speculators have remained bullish on the greenback in view of the continuing uncertainties over Brexit and trade negotiations between China and the United States.

· An index that tracks the dollar against a basket of currencies was little changed on the day at 96.85, just below a two-week high reached on Tuesday.

· The euro bounced back above $1.13 after hitting a two-week low at $1.12855 earlier Wednesday. It was a marginally lower on the day at 126.42 yen.

· Analysts expected little surprises from the European Central Bank meeting on Thursday amid speculation that it is getting ready to make new cheap loans to struggling banks through its Targeted Long-Term Refinancing Operations (TLTROs).

· Sterling would lose around 9 percent of its current value against the dollar and trade at $1.20 in the immediate aftermath of Britain leaving the EU without a deal, a Reuters poll of foreign exchange strategists predicted.

However, most economists expect the two sides to eventually agree a free trade deal, and medians in the Feb 28-March 5 poll of over 60 strategists said cable would be at $1.32 at the end of March as the divorce is due to take effect - close to the $1.314 it was hovering around on Wednesday.

· Talks with Britain on amending its divorce deal with the European Union have made no headway and no swift solution is in sight, EU officials said on Wednesday, a week before British lawmakers must vote on the plan to avoid a chaotic Brexit.

· Private-sector employment has “throttled back” in February, according to the economist who prepared the data released Wednesday. Employers added 183,000 jobs in February, compared with a revised 300,000 in January, ADP reported. The gain in February was close to forecasts from economists who expected a gain of 180,000.

“Job gains are still strong, but they have likely seen their high-water mark for this expansion,” said Mark Zandi, chief economist at Moody’s Analytics, in a statement. In an interview on CNBC, Zandi said he now sees gross domestic product running at a 0.3% annual rate in the first quarter, much slower than the 2.6% rate reported for the final three months of last year. This slowdown “will start to show in payroll data,” he said.

· U.S. trade deficit soared to 621 billion U.S. dollars in 2018, the highest in a decade, data released Wednesday by the U.S. Department of Commerce showed.

The 68.8-billion-dollar annual increase, or 12.5 percent, came along with a net loss in goods and services trade of 59.8 billion dollars in December, up 15.2 percent from 51.9 billion dollars in the same period a year earlier.

· The U.S. Federal Reserve is considering when to stop reducing bank reserves and start building up its balance sheet again, according to a paper from the Kansas City Fed released on Wednesday.

· Analysts and traders worry that a shrinking Fed balance sheet is making it expensive for banks to finance loans and trading positions, restricting their lending to companies and consumers.

But investors have been critical, and U.S. President Donald Trump even urged the Fed in a tweet in December to “Stop with the 50 B’s.” Balance sheet reductions are capped at $50 billion a month.

· Oil prices were mixed in choppy trade on Wednesday, after government data showed a surge in weekly U.S. crude stockpiles that was partly offset by a drop in the nation's inventories of refined fuel.

A drop in U.S. equity indexes also weakened sentiment in crude prices.

U.S. West Texas Intermediate crude futures settled 34 cents lower at $56.22 per barrel, off a session low at $55.42. International Brent crude futures up 11 cents at $65.97 per barrel around 2:30 p.m. ET.

· U.S. crude inventories rose by 7.1 million barrels in the week ending March 1, the U.S. Energy Information Administration reported. That compared with analysts' expectations for a modest increase of 1.2 million barrels in a Reuters poll.

Reference: CNBC, Reuters, Market Watch