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Could Tariffs on Steel and Aluminum Help Copper?

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Could Tariffs on Steel and Aluminum Help Copper?

A weaker dollar and strong reports out of China have given copper a boost this week. The price of copper rose by the most in almost a month in early Tuesday trading, to open near $3.17 a pound.

The aforementioned weaker dollar is tied to last week’s announcement by President Donald Trump that he was going to follow through on his campaign promise and put tariffs on imports and put a 25% tariff on steel and a 10% tariff on aluminum. President Trump’s plan faces an uphill battle, even in his own party.

The news has not been well received in markets around the globe either. In fact, the tariff talk has pushed the dollar lower, which in turn, helps push up dollar-denominated metals – like copper – by making them cheaper for users of other currencies.

Another force helping copper’s cause is news out of China. China’s Premier Li Keqiang said, in remarks prepared for delivery at the opening of the annual meeting of parliament yesterday, that the country aims to expand its economy by around 6.5 percent this year, the same as in 2017.

The world’s biggest metals consumer, is expected to show growth was mostly stable at the start of the year as exports picked up and factory activity remained largely resilient.

“The long-term view on copper is still very positive,” ABN AMRO analyst Casper Burgering told Reuters. “Demand will remain sound and we expect some shortages in the second quarter.”

Burgering also told Reuters that copper, used in power and construction, would likely finish the year around $7,100-$7,150 a ton. In December it touched a four-year high of $7,312.50.

Frequent contributor Andrew Hecht, of Seeking Alpha, points out that copper has not traded below the $3 level so far this year. Before 2017, the red metal had not traded above that price since 2014.

“Copper has been in an almost picture-perfect bull market since early 2016,” Hecht says. “I continue to believe that copper’s best days are ahead and the price will eventually move above the late 2017 high at $3.322 per pound…A continuation of economic growth around the world could eventually put the price back above the $4 per pound level.”

Looking ahead at the week, Investing.com has compiled a list of significant events likely to affect the markets.

Tuesday, March 6

Australia is to release data on retail sales and the current account.

The Reserve Bank of Australia is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision.

Wednesday, March 7

Australia is to release figures on fourth quarter growth.

The UK is to publish an industry survey on house price inflation.

The U.S. is to release the ADP nonfarm payrolls report for February.

Canada and the U.S. are to publish trade data.

The Bank of Canada is to announce its benchmark interest rate and publish a rate statement.

Thursday, March 8

Both China and Australia are to release trade data.

The ECB is to announce its latest monetary policy decision. The announcement is to be followed by a press conference with President Mario Draghi.

Canada is to publish data on building permits and new house price inflation.

The U.S. is to produce the weekly report on jobless claims.

Friday, March 9

China is to release data on consumer and producer price inflation.

The BoJ is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision. The announcement is to be followed by a press conference.

The UK is to release data on manufacturing production and trade.

Canada is to publish its latest employment report.

The U.S. is to round up the week with the non-farm payrolls report for February

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Jim Williams

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