Copper fluctuates ahead of FOMC meeting conclusion

Copper traded mostly lower in Asian trading but rebounded to positive territory on in the European session amid increased market volatility before the Federal Open Market Committee concludes its meeting later today. Policy makers will decide whether they should begin decelerating Feds Quantitative Easing program but broad expectations point in that direction.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December rose by 0.50% to $3.240 per pound at 8:18 GMT. Prices touched a days low of $3.207 a pound during Asian trading but rebounded to a days high of $3.242 in the European session. The industrial metal rose by 0.3% on Tuesday and extended its weekly advance to little over 0.6% following Wednesdays advance.

Copper, as many other commodities priced in the U.S. dollar, experienced volatility amid the ongoing FOMC meeting that is due to end later today. Dollar-denominated raw materials tend to trade inversely to the greenback as strengthening of the dollar makes them more expensive for foreign currency holders and limits their appeal as an alternative investment. According to a Bloomberg survey conducted on September 6, the central bank will reduce its monthly purchases of Treasuries to $35 billion from $45 billion and keep mortgage-bond buying unchanged at $40 billion. Credit Suisse analysts expected a $20 billion reduction of the program.

Fang Junfeng, an analyst at Shanghai CIFCO Futures Co., said for Bloomberg: “Investors are awaiting the Fed’s announcement on whether it intends to reduce its stimulus. Trading on the Shanghai exchange should be quiet today as no one will take risks on the four-day break, especially before the Fed’s decision later today,” he referred to the Mid-Autumn Festival holidays, which will keep markets closed on September 19-20.

Copper was supported in the last couple of days by positive data from the U.S. to China and Europe. On Monday, data showed that U.S. industrial production in August has matched analysts projections for a 0.4% expansion, compared to remaining flat in July. The report also showed that capacity utilization, which measures of how fully firms are using their resources also met economists’ expectations and rose by 0.2% to 77.8%. Manufacturing production, a component of the broader indicator, rose by 0.7% in August and reversed July’s 0.4% drop, mainly due to a 5.2% rebound in automobile assembly, which declined 4.5% in July.

In economic news on Tuesday, Germanys ZEW Economic Sentiment index surpassed analysts projections for a rise to 45.0 in September from Augusts 42.0 and surged to 49.6. The ZEW Current Situation index also surprised positively and rose to 30.6, compared to an anticipated increase to 20.0 from the preceding months 18.3. The Euro zone also marked an improvement. The single currency blocs ZEW Economic Sentiment index surged to 58.6, surpassing economists expectations for a moderate gain to 47.2 from Augusts 44.0 reading.

Also on Tuesday, The Conference Board reported that its Leading Economic Index for China rose by 0.7% in August and stood at 269.3. This comes after a 1.4% advance in July and 0.8% increase in June. Five of the six components of the index contributed positively to the reading. Meanwhile, The Conference Board Coincident Economic Index, which measures current economic activity, rose by 1.2% in August to 248.7 after gaining 1.1% both in July and in June. All five components added to the positive value of the index.