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Copper Roundup – From China and the Budget, to the Dollar and the Market

Copper Roundup – From China and the Budget, to the Dollar and the Market

By Jim Williams

Copper hit a three-week high mark to start the week thanks to a weaker dollar, but investors are holding their collective breath to see the impact recent economic data coming out of China will have on the price of copper.

The latest report shows China’s imports of refined copper in April slid 41 percent from a year ago. Refined copper imports fell to 202,645 tons last month. That’s the lowest since February. Experts close to the pulse of the red metal say the massive drop was because traders had their buying power limited by tighter access to credit.

“In general, metals traders have been suffering from rising financing costs, fierce competition and a slowing economy,” said JP Morgan in a report.

“While Chinese banks have anecdotally been maintaining existing credit lines for metals-based companies, it has become increasingly hard to get approval for new lines of credit.”

Back to the Dollar
Fueled by a comment from German Chancellor Angela Merkel, the euro hovered near a six-month high against the dollar to open the market on Tuesday. The Chancellor said the currency was “too weak.” As you probably already know, a weaker dollar makes commodities, priced in dollars, more affordable for holders of other currencies.

A Shanghai-based copper analyst told Metal Bulletin, “If the U.S. dollar continues to fall and crude oil prices continue to rise, then there is a higher chance for the copper price to keep rising.”

The Impact of President Trump’s Budget Proposal
The first full budget proposal for the Donald Trump administration was delivered this morning. We will have to see how this plays out, but part of the proposed budget includes $4.1T for Congress to spend in 2018 – including a boost to defense, border security and infrastructure.

We will keep an eye on the impact of the budget and see if the infrastructure portion has the expected push on the price of copper investors have expected since President Trump was just The Donald on the campaign trail.

Seeking Answers
Frequent contributor Andrew Hecht of Seeking Alpha suggests you can keep an eye on the budget, China and the Euro, but he’s taking stock in one key factor. “The stock market poses the biggest danger for the copper market,” states Hecht. “Copper is waiting for either an uptick in economic growth in China or legislation for infrastructure rebuilding in the United States. Therefore, copper is likely to be a follower rather than a leader when it comes to the stock market over coming sessions.”

You can follow the price of copper with our new favorite chart. Click on the image below to go to DailyFX and track the red metal live. The interactive chart is powered by TradingView.

 

 

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