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Copper Outlook: The Fed and G20 Summit Presidential Meeting

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Copper Outlook: The Fed and G20 Summit Presidential Meeting

There are some big events on the calendar this week that will impact not just copper prices, but the global economy. The eyes of the world will be waiting and watching to see what the Federal Reserve minutes look like when they are released Thursday. The following day, the focus will shift to the highly anticipated meeting between President Donald Trump and his Chinese counterpart Xi Jinping.

First, investors are anxiously waiting for the release of the minutes from the Federal Reserve’s November policy meeting. A speech on Wednesday by Fed Chairman Jerome Powell will be closely watched after other Fed policymakers recently sounded more dovish on the economic outlook.

Now for what looks like the main event of the week, the meeting between President Trump and China’s Xi Jinping. The G20 summit kicks off Thursday in Buenos Aires. The meeting between presidents to talk trade and tariffs is scheduled for Friday.

In advance of the G20 summit trade talks, President Trump says he expects to move ahead with raising tariffs on $200 billion of Chinese imports. As a result, London copper prices extended losses into a third straight session on Tuesday.

In an interview with the Wall Street Journal, President Trump said it was “highly unlikely” he would accept China’s request to hold off on a planned increase in the tariffs from 10 percent to 25 percent due to take effect on January 1.

Trump said that if negotiations were unsuccessful, he would also impose tariffs on the rest of Chinese imports.

Copper is down around 15% so far in 2018, mainly on concerns the U.S.-China trade spat will hurt demand for industrial metals.

“I believe that while both sides claim they are prepared for a long and challenging trade war,” writes Andrew Hecht, of Seeking Alpha. “Each has reasons to settle the dispute giving the other side a minimum, so that they can claim victory for their constituents. It is likely that we will see lots of volatility in the copper…market this week and in the aftermath of the accord. A trade agreement could be bullish for the commodities asset class.”

You can read all of Andrew’s thoughts on the G20 summit meeting in his Seeking Alpha article The Commodities Market Turns Its Attention to Argentina.

Copper prices ended lower in Friday’s holiday-shortened trading session, to end the week down a little more than 1%. The red metal opened this morning at $2.72 a pound. Copper has been pressured lower recently as the dollar strengthened broadly and a because of a steep drop in oil prices.

A stronger dollar can make dollar-denominated assets, like copper, more expensive to potential buyers holding other currencies.

The dollar has pulled back since hitting 16-month highs in early November, as some soft economic data and dovish sounding comments by several Fed policymakers raised the prospect that the Fed may be nearing the end of its tightening cycle. We will see how the dollar reacts to the release of the minutes, and to the meeting between the leaders of the world’s two largest economies.

Here is a look at the significant events likely to affect the markets this week as compiled by Investing.com.

Monday, November 26

The Ifo Institute issued its report on the German business climate.

European Central Bank President Mario Draghi testified about the economy and monetary policy to the European Parliament in Brussels.

Tuesday, November 27

New Zealand is to release its latest trade data.

The U.S. is to publish a report on consumer confidence.

Wednesday, November 28

The U.S. is to publish revised data on tthird-quarter growth and a report on new home sales.

Fed Chairman Jerome Powell is to speak in New York.

Thursday, November 29

New Zealand is to report on business confidence, while Australia is to publish figures on private capital spending.

In the euro zone, Germany is to release preliminary inflation data.

ECB head Mario Draghi is to speak at an event in Frankfurt.

The UK is to report on net lending, while the BoE is to deliver its analysis of Brexit to the Treasury select committee.

The U.S. is to produce data on initial jobless claims and pending home sales as well as personal spending figures, along with the core PCE price index, which is the Fed’s preferred inflation measure.

The Fed is to publish the minutes of its November meeting.

Friday, November 30

U.S. President Donald Trump and his Chinese counterpart Xi Jinping are due to meet on the sidelines of the G20 conference in Buenos Aires.

China is to publish data and manufacturing and non-manufacturing activity.

The euro zone is to release preliminary inflation data.

Canada is to report on GDP growth and raw material price inflation.

The U.S. is to round up the week with data on business activity in the Chicago area.

 

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Jim Williams

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