The U.S. dollar inched lower Thursday, giving back some of the overnight gains as traders digested the latest Federal Reserve rate decision as well as the U.S.-China trade talks.

At 05:20 ET (09:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 98.950, after climbing to a two-week high late Wednesday.

Dollar helped by reduced rate cut bets

The U.S. central bank lowered interest rates by 25 basis points to a range of 3.75% to 4% on Wednesday, as widely expected, although the likelihood of another cut this year remains uncertain due to a dearth of new economic data during an ongoing federal government shutdown.

Speaking in a post-earnings press conference, Fed Chair Jerome Powell flagged that another similarly-sized rate drawdown was "far from" a foregone conclusion at the central bank’s next gathering in December.

Following the comment, traders brought down their bets on a rate cut at the meeting to a probability of 71%, down from 90% earlier.

“Last night’s Fed communication makes it harder to sell the dollar now,” said analysts at ING, in a note. “We will really need to see some soft U.S. jobs data to firm up views of another 75bp of easing from the central bank into next summer. Otherwise, 25bp could easily be priced out of that cycle.”

The safe-haven dollar was also helped by uncertainty surrounding the trade talks between U.S. President Donald Trump and his Chinese counterpart Xi Jinping.

Trump described the first in-person talks between the two leaders in six years as "amazing," saying that the U.S. would immediately bring down levies on Chinese goods.

In exchange, Trump said Beijing had pledged to help crack down on the flow of the chemicals used to make the illegal drug fentanyl into the United States, and agreed to pause controls on exports of rare earth minerals.

That said, analysts at Vital Knowledge said "the deliverables don’t really alter the status quo" of U.S.-China trade relations "dramatically."

Euro helped by French GDP

In Europe, EUR/USD rose 0.2% to 1.1618, after data showed that France’s economy, the eurozone’s second largest, grew 0.5% in the third quarter, faster than forecast.

Economists had forecast 0.2% growth from the second quarter when the French economy had expanded 0.3%.

Growth data for the eurozone as a whole is due later in the session, and is expected to show quarterly growth of just 0.1%, resulting in annual growth of 1.2%.

“Remember that survey data has been encouraging, but the hard data has so far been poor this summer,” said ING. “But unless we get a big upside surprise to eurozone GDP – expected at 0.1% QoQ – it is hard to see EUR/USD getting much of a lift.”

The European Central Bank meets later in the session, and the central bank is widely expected to keep interest rates unchanged.

“We doubt President Christine Lagarde will feel the need to rock the boat of market pricing, which very marginally favours another cut sometime over the next nine months.” ING added. 

GBP/USD gained 0.1% to 1.3199, but remains near Wednesday’s 5-1/2-month low.

Yen slips after BOJ stands pat 

In Asia, USD/JPY traded 0.7% higher to 153.74, after the Bank of Japan left interest rates unchanged and flagged a cautious outlook on the economy. 

The BOJ warned that Japan faced heightened economic uncertainty in the near-term, but that accommodative financial conditions would offset some of this impact. 

The central bank also largely reiterated its messaging that it will raise interest rates if the economy and inflation rise in line with its forecasts.

USD/CNY traded 0.2% higher to 7.1089, after the conclusion of the Trump-Xi meeting, with the yuan retreating from its strongest level in a year. 

Trump, speaking to reporters after the meeting, said he saw a trade deal with China coming "pretty soon," and that the two had also agreed to deals on rare earths and agriculture purchases.

AUD/USD traded largely unchanged at 0.6575.