LONDON (ShareCast) - (ShareCast News) - With only hours to go before the policy announcement by the Federal Reserve, US equity markets were trading slightly higher on Wednesday, while oil prices rebounded.
At 1557 GMT, the Dow Jones Industrial Average was up 0.22% to 20,882.59, the S&P 500 rose 0.32% to 2,373.07 and the Nasdaq was 0.18% firmer at 5,867.47.

In currency markets, the dollar was down 0.5% against the pound to 0.8186, fell 0.29% versus the euro to 0.9403, and was flat against the yen at 114.68.

Investors were pricing in a likely 25 point basis point hike by the Fed to between 0.75% and 1% and will look out for suggestions for when the central bank's next rate hike might come.

Craig Erlam, senior market analyst at Oanda, said that market expectations have been raised dramatically ahead of the meeting by a coordinated onslaught of hawkish commentary from policy makers, to the point that a rate hike is about 94% priced in.

The upside on the hike itself therefore looks very limited, which Erlam said means we're relying on the 'dot plot' and Fed chair Janet Yellen if we're going to the dollar and US yields strengthen.

He said that the coordination from policy makers could have been driven by the belief that four rate hikes will be needed this year, which is around 22% priced.

"A rate hike now and another in June would certainly leave the door open to four increases and stop the Fed falling behind the curve if the US economy does respond strongly to either Trump's stimulus plans - should they be enacted this year - or the prospect of them. If the 'dot plot' points to four hikes then I think the dollar may have further to run, if not then we could be perfectly in buy the rumour sell the fact territory", Erlam said.

The Fed will release its statement and new economic forecast at 1800 GMT followed by a press conference from Yellen.

Ahead of the rate announcement, investors had been met by a raft of economic releases.

The consumer price index rose 0.1% in February, in line with expectations month-on-month and was 2.7% higher on an annualised basis - a five-year high.

Retail sales increased 0.1% as expected in February month-on-month, to $473.99bn and 5.7% higher from last year.

The National Association of Home Builders/Wells Fargo housing market index rose to 71 in March from 65 the month earlier, beating expectations for an unchanged reading.

The component gauging current sales conditions increased seven points to 78, while the index charting sales expectations in the next six months rose five points to 78 and buyer traffic was up eight points to 54.

The New York Empire State manufacturing index fell to 16.4 in March from 18.7 in February, marginally above the 15.0 consensus forecast.

Meanwhile, oil prices rebounded from the previous session's losses following a surprise drawdown in US inventories and data from the International Energy Agency suggesting OPEC cuts could push the crude market into deficit in time.

West Texas Intermediate was up 1.6% at $48.50 a barrel and Brent crude was 1.37% higher at $51.63.

Prices had slumped on Tuesday after data showed major producer Saudi Arabia has started to increase production.

On the corporate front, shipping company Golden Ocean Group rallied 7.69% after it said it has successfully completed its $60m share offering.

Twitter was down 2.64% after at least dozens of prominent accounts were hacked early in the day.

Shares in AT&T were up 0.51% after the European Commission approved its $85bn acquisition of Time Warner, which was up 0.17%.

MSCI was up 9.8% before its shares were halted and on news that S&P Global made a buyout bid.

Earnings are due from Oracle, Williams-Sonoma and Guess after the closing bell.

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