- The depletion of inventories and the heat wave in China restrict the supply of the industrial metal.
- Expectations of more stimulus from China are coupled with a pullback in yields.
The Copper price swings around one-week highs, reversing the previous day’s pullback, as a weakening dollar joins hopes of further supply tightening. Hopes that China will announce more stimulus to defend the world’s second-largest economy from recession add strength to recovery moves.
That said, COMEX copper futures print slight gains around $3.6570, up 0.10% intraday, while 3-month copper on the London Metal Exchange (LME) matches the move and The latest price is around $8,040.
The energy crisis in Europe, China’s willingness to apply new stimulus and the depletion of inventories are some of the main catalysts that have recently defended the price of copper. Notably, the latest heat wave in China is forcing many metals producers to halt manufacturing plants and thus portray supply shortages, as well as leading to a drawdown in inventories.
Elsewhere, hard-line bets from the Fed and rumors that China won’t be able to stem the economic slowdown amid widespread pessimism appear to challenge metals buyers. Along the same lines could be the concerns surrounding the disputes between Russia and Ukraine. Reuters quotes an unnamed US official as saying that Russia is preparing attacks on Ukraine’s infrastructure in the coming days. Meanwhile, the New York Times (NYT) reported that the US is sending more weapons to Ukraine to help fight back.
Amidst these plays, market sentiment remains unclear and therefore worries metals traders. As a result, the UK, Eurozone and US S&P Preliminary Global PMIs for August will be released today, which will be important for further momentum. US New Home Sales for July and the Richmond Fed Manufacturing Index for August will also be released. Above all, Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium, due out on Friday, will be crucial for the market as a whole.
Should economic fears prevent Powell from favoring a 0.75% rate hike in September, copper prices could see further gains due to its inverse relationship with the US dollar.
Source: Fx Street
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