(Updates headline and prices throughout, adds fresh analyst

quote, New York dateline)

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Dollar edges higher as investors await Fed

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Canada cuts rates due to weak labor market

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European shares erases earlier losses

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S&P 500 and Nasdaq lose ground

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Gold prices retreat from record

By Dhara Ranasinghe and Chibuike Oguh

NEW YORK/LONDON, Sept 17 (Reuters) - World stocks traded

flat while the U.S. dollar was marginally higher on Wednesday as

investors eyed a widely anticipated Federal Reserve interest

rate cut taking place against a backdrop of some drama that

raises questions about the central bank's independence.

The Fed is expected to cut interest rates by a quarter of a

percentage point to the 4.00%-4.25% range later on Wednesday,

with the focus on any comments from Fed Chair Jerome Powell on

the outlook for monetary policy.

On Wall Street, the benchmark S&P 500 was a shade lower, the

Nasdaq was down and the Dow rose, with consumer staples and

financials leading gains. Technology and consumer discretionary

stocks were losing ground.

The Dow Jones Industrial Average rose 0.53%

to 46,000.09, the S&P 500 fell 0.09% to 6,600.78 and the

Nasdaq Composite fell 0.36% to 22,254.15.

European shares was up 0.2%, while Japan's

blue-chip Nikkei index pulled back from record highs.

"It's pretty much a done deal this notion of a

25-basis-point cut from the Fed and if we do get that, there's

an argument that we might not get much movement in the stock and

bond markets because it's broadly expected and priced in," said

Talley Leger, chief market strategist at The Wealth Consulting

Group.

The September meeting also takes place under unusual

circumstances - Steven Miran, on leave from the Trump

administration, has joined the Fed board while Fed governor Lisa

Cook has so far fought off efforts by President Donald Trump to

oust her.

"Given the pretty alarming downward revision to payrolls ...

that's a big warning shot across the Fed's bowels so I wouldn't

be surprised that we kind of err on the side of some dovishness

with the cut," Leger said.

The dollar index, which tracks the dollar against a

basket of currencies of major trading partners, edged up 0.06%

after falling on Tuesday to the lowest since early July.

The euro slipped 0.09% to $1.1856, after touching

$1.1867 on Tuesday, its highest level since September 2021. But

the dollar was a touch softer at around 146.24 yen against the

yen and was flat at 0.78585 against the Swiss franc

Money markets price in almost 70 bps of Fed easing by

year-end.

MSCI's All-Country Index was down 0.04% at 976.39, just

below Monday's record highs. In Asia, MSCI's

broadest index of Asia-Pacific shares outside Japan

closed rose 0.46%, buoyed by signs of progress

of a deal to allow the Chinese-owned social media platform

TikTok to keep operating in the U.S.

The Bank of Canada cut rates on Wednesday to contend with a

flagging labor market and trade frictions.

In Europe, data showing UK inflation holding at 3.8% in August

reinforced expectations for no rate change at Thursday's Bank of

England meeting.

Sterling rose 0.14% to $1.3666.

Brent crude futures were last up 0.01%, to $67.49 a

barrel, while U.S. West Texas Intermediate crude futures

was flat at $64.52.

Spot gold fell 0.28% to $3,679.08 an ounce, after the

yellow metal crossed $3,700 for the first time in the previous

session.