Hopes Rise ahead of the FOMC Meeting, as Stocks, Oil, and Majors Rebound to the Upside

By FXEmpire.com

U.S. stock markets rebounded on Tuesday, after suffering huge losses on Monday, where the Dow Jones Industrial Average index ended with most loss of points since 2008, as the index fell on Monday by more than 600 points. Nonetheless, hopes are back in markets on Tuesday ahead of the FOMC rate decision, as traders are hoping the FOMC will signal some sort of support amid the recent turbulence in markets.

Most analysts don’t expect the FOMC to announce QE3, since they believe the Fed will confirm their commitment by pledging to leave interest rates at exceptionally low levels for an extended period, while also pledging to keep the current expanded balance sheet unchanged. Nonetheless, some analysts predict the FOMC will go the extra mile and announce a third round of quantitative easing, and if that proves to be the case although unlikely, we should expect equity market to extend their gains.

Meanwhile, the situation in Europe remained very much unchanged, where traders are still concerned that the European debt crisis will spread to other countries in the Euro Zone including Italy and Spain, which maintained the negative pressure on the European stocks.

Stocks in the United States rebounded to the upside by opening on Tuesday, where the Dow Jones Industrial Average was up by nearly 1.90% to trade around 11,015, while the S&P 500 index was up by nearly 2.40% to trade around 1145. European stock indexes were mixed before closing on Tuesday, where FTSE 100 was up by nearly 0.50% to trade at 5094 and the DAX was down by nearly 1% to trade around 5864.

The U.S. dollar dropped against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 74.48, compared with the opening level at 74.66. The Euro recovered some of its against the Dollar, where the EUR/USD pair traded at $1.4252, compared with the opening level at $1.4175, but the British Pound extended its drop against the Dollar after worse than expected economic data from the U.K., where the GBP/USD pair traded around $1.6297, compared with the opening level at $1.6319.

Gold prices rose earlier on Tuesday to a new record high above $1779 an ounce, but erased most of its earlier gains to trade around $1727 an ounce, and crude oil prices also erased earlier losses and rose back to trade around $82 a barrel, after falling earlier on Tuesday to the lowest level since September 2010 around $75 a barrel.