At 1533 GMT, benchmark copper on the London Metal Exchange was traded at $6,440.25 a tonne from $6,550 at the close on Monday, when it rose on strong manufacturing data from the United States and China, the world’s largest consumer of industrial metals.

The U.S. Federal Reserve starts a two-day meeting on Tuesday. Investors are focused on what the central bank has to say about economic growth and the future direction of benchmark interest rates.

“If the Fed reveal a bit of a bias, signalling that easy money conditions are coming to an end, that could spark another rally in the dollar and we could see another shoe-drop in commodity prices,” said Edward Meir, energy and metals analyst for MF Global in New York. “Everyone is short the dollar and long commodities.”

“Today’s action suggests they are expecting the worse (with) selling off ahead of the announcement,” he added. “We’re going to see short-term weakness up until the announcement.”

The market is also waiting for the monthly employment report from the United States on Friday.

The U.S. unemployment rate is forecast at 9.9 percent in October from 9.8 percent in September, while non-farm payrolls are forecast to fall 175,000 from a drop of 263,000.

“If the unemployment rate goes through the psychological 10 percent, that could hit sentiment ... But given the manufacturing data yesterday, the unemployment number could be better than expected,” said John Meyer, analyst at investment bank Fairfax.

Traders said the dollar at a one-month high against a currency basket was also hurting base metals, which become more expensive when the U.S. currency strengthens.

Macro data alert

On the economic calendar, new U.S. factory goods orders for September beat Wall Street expectations to gain 0.9 percent, the Commerce Department said.

“These numbers aren’t really doing very much,” MF Global’s Meir. “The market is sensing that much of the increase is due to government stimulus spending.” October vehicle sales due later on Tuesday could weigh on base metals.

Aluminium traded at $1,906 from $1,915 on Monday. Price prospects for the metal used in transport and packaging are weaker because Chinese producers have been ramping up output due to recent higher prices, up more than 20 percent this year.

Stocks near record highs above 4.5 million tonnes and demand uncertainty will also keep a lid on aluminium prices.

“The outlook for prices remains uncertain. On the one hand, a strictly fundamental analysis of current market conditions suggests that an arguably overdue correction should bring prices closer to equilibrium,” consultants GFMS said in a release.

“On the other, ongoing strong presence of investors on the long side could well support prices’ upward trajectory until a more noteworthy improvement in fundamentals emerges.”

Primary aluminium for delivery in the first quarter of next year is being offered at higher premiums than this quarter however, indicating physical supplies remain tight for coming months, traders said.

But traders said the selling of metals on Tuesday in Europe could be because of plans by Britain’s Lloyds Banking Group to raise 13.5 billion pounds ($21.99 billion) in the world’s largest ever rights issue.

“Investors could be selling commodities to get the cash they need to take up their shares in Lloyds,” a London-based metals trader said. “But generally as well investors are still filling up on commodities.”

Flows of money from long-term investors, looking to rebalance their portfolios has been a major factor behind commodity price rises this year, analysts said.

Zinc traded at $2,187 a tonne from $2,195 on Monday. Lead traded at $2,275 from $2,298, nickel was at $17,950 from $18,060 and tin at $14,700 from Monday’s last bid at $14,775.