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Copper Posts a Positive Week

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Copper Posts a Positive Week

It feels like it’s been a while, but copper actually posted a positive week last week. The momentum for the red metal continued Monday as copper prices edged higher fueled by a weaker dollar despite the escalating trade spat between the U.S. and China.

Copper moved 0.90% higher last week and pushed up another 0.2% on Monday. The ‘rally’ may not push the needle too far, as the 800-pound gorilla in the room – the trade war – still has copper and global markets in limbo.

The latest news has President Donald Trump imposing 10 percent tariffs on about $200 billion worth of imports from China, and threatening duties on about $267 billion more if China retaliated against the U.S. action.

In a statement this morning, China says it doesn’t have a choice. China’s Foreign Ministry spokesman Geng Shuang told a daily news briefing the latest move by the U.S. has brought “new uncertainty” to talks between the two countries.

“China has always emphasized that the only correct way to resolve the China-U.S. trade issue is via talks and consultations held on an equal, sincere and mutually respectful basis. But at this time, everything the United States does not give the impression of sincerity or goodwill,” he added.

Trade worries have pushed copper prices down 20% from their June four-year highs.

Frequent tED contributor Andrew Hecht of Seeking Alpha weighs in on the issue.

“It is possible that the back and forth between the U.S. and China continues to be posturing for negotiations leading to an eventual agreement,” states Hecht. “President Xi and President Trump have established a good working relationship. Any agreement will need to come in the form of a victory for both leaders. While economics favors the United States, politics favor China. President Xi has a lifetime position if he desires, with no pressure of elections as he makes decisions on the trade issue. President Trump is on the other side of the coin as the U.S. stock market remains strong, but political opposition continues to rise within the United States. President Trump badly needs a victory on trade before the mid-term elections in November. Any improvement in the trade balance with the Chinese would be a victory for the U.S. leader. Therefore, it is in the best interest of both the U.S. and China to come to terms on an agreement to avoid a prolonged trade dispute, or a trade and currency war.”

A stronger dollar has also hurt copper by making it more expensive for overseas buyers, but the Dollar Index, which tracks the dollar against a basket of 16 other currencies, fell 0.3% Monday.

That decline boosted industrial metals, at least for a day. At this point, any positive news is likely to be a boost for the price of copper, but for now, the pressure continues to be on the downside in the base metal.

Looking Ahead

Investing.com has compiled a list of significant events likely to affect the markets this week.

Monday, September 17

The euro area released revised inflation data.

Tuesday, September 18

European Central Bank President Mario Draghi is to speak at an event in Paris.

Wednesday, September 19

The Bank of Japan is to announce its benchmark interest rate and publish what will be a closely watched rate statement. The announcement is to be followed by a press conference.

The UK is to release inflation data.

The U.S. is to release reports on building permits and housing starts.

ECB President Draghi is to speak at an event in Berlin.

Thursday, September 20

The Swiss National Bank is to announce its benchmark interest rate decision.

The UK is to report on retail sales.

The U.S. is to release reports on jobless claims and manufacturing activity in the Philadelphia region.

Friday, September 21

The euro zone is to release data on manufacturing and service sector activity.

Canada is to round up the week with data on retail sales and inflation.

We will keep one eye on the dollar and the other eye on the ongoing saga between the U.S. and China and keep you updated on the impact on the price of copper.

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Jim Williams

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