MORNING BID EUROPE-Traders still guessing in final Fed countdown

A look at the day ahead in European and global markets from Kevin Buckland

With just hours until one of the most highly anticipated central bank decisions in recent memory, traders are still agonising over the odds of a super-sized Federal Reserve rate cut.

An unexpected rise in U.S. retail sales on Tuesday initially knocked back bets for a 50-basis-point reduction to kick off the U.S. easing cycle, but it didn't last long. Futures-implied probabilities oscillated early in the Asian session, before steadying at about 65%.

How markets are positioning in the final countdown to the Fed announcement, due at 1800 GMT on Wednesday, varies by asset class.

The dollar was ceding ground, particularly against the yen. But U.S. short-term Treasury yields were ticking higher.

Equities overall were weak - except in Japan, where the Nikkei rebounded from Tuesday's plunge as it continued to show a day-late reaction to swings in the yen.

Early indications from European stock futures were for small losses.

Expectations for the Fed's total easing this year have come down a bit but still lean towards a pair of 50 bps cuts and a single 25 bps reduction over the remaining three policy meetings of 2024 - a very dovish proposition considering the economy is flashing few signs of distress.

The all-important U.S. consumer in particular seems to be in very robust health, with recent figures showing household net worth at a record high and debt at a 23-year low.

From that perspective, a less market-friendly quarter point cut could be seen as more appropriate.

The euro zone data docket is fairly light in the lead-up to the Fed decision, with region-wide inflation data for August the main event.

British consumer and producer price indexes could have more of an impact. Lest we forget, the Bank of England has its own policy announcement to make on Thursday.

Key developments that could influence markets on Wednesday:

-UK CPI, PPI (both August)

-Euro zone HICP (August)

-Sweden unemployment rate (August)

(By Kevin Buckland; Editing by Edmund Klamann)