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India and the Dollar Top Copper News

India and the Dollar Top Copper News

The dollar is on a roll, and the closing of a controversial copper plant in India is making waves with the price of the red metal.

The Dollar

The markets opened this morning after the Memorial Day holiday. We will have to wait and see if the dollar can continue its recent six-day gain streak or not. At the closing bell Friday, the dollar index was over the 94 level after reaching a high of 94.19 last week, 5.9% higher in a month and a half.

The dollar is the reserve currency of the world and the benchmark pricing mechanism for most commodities. As such, commodities prices typically respond negatively to changes in the value of the dollar.

“The path of least resistance for the dollar will be a significant influence when it comes to the direction of many commodities prices,” states frequent tED contributor Andrew Hecht of Seeking Alpha. “The big question heading into the week is if the dollar index has the power and support to rise through the 95.07 level on the June futures contract.”

India Copper Plant

Normally, it is China making headlines affecting the price of copper. This holiday-shortened week is starting out with all eyes on India. That is because the country’s largest copper plant was forced to close after protests outside the facility turned deadly.

The Tamil Nadu government ordered the Sterlite Copper plant in Thoothhukudi to close in the interest of the people. Sterlite Copper is a subsidiary of UK-based Vedanta Resources. Reports out of India claim the plant has been controversial since it opened more than 20 years ago. Authorities decided to close the 400,000 metric-ton-per-year plant after police fired on a crowd of protestors last week, reportedly killing 13 people.

The closure of Sterlite Copper’s plant in Thoothukudi will cut India’s copper production by about half, spurring imports, according to Bloomberg. In the financial year 2017-18, Vedanta produced about 48 percent of the country’s total copper output.

BBC News has compiled a detailed look at the controversial history of the plant.

India produced approximately 10 percent of the world’s copper. We will have to wait and see what this closing does to the overall price of the red metal.

The Fed

The minutes from the Federal Reserve’s May 1st-2nd monetary policy meeting were published last week. The notes indicate “a temporary period of inflation modestly above 2 percent would be consistent with the Committee’s symmetric inflation objective.”

Here are some key points pulled from the minutes as compiled by FXStreet:

  • Modest inflation overshoot ‘could be helpful’
  • Most felt it would ‘soon be appropriate’ to hike should outlook remain intact
  • Trade raised a ‘particularly wide’ range of risks
  • A few noted that Fed funds could reach neutral level ‘before too long’ if rate increases continued
  • Some noted it may soon be appropriate to change guidance
  • Many saw little evidence of overheating of the labor market with wage pressures ‘still moderate’
  • A few cautioned that inflation expectations remained somewhat low
  • Most viewed firming of inflation as providing ‘reassurance’ that 2% would be reached
  • Some officials saw forward-guidance revisions appropriate soon

All signs point to an interest rate high in June. The question remains, how many more will happen over the last half of the year?

The Week Ahead

It was mentioned earlier that all eyes are on India. As you can tell from Investing.com’s list of significant events likely to affect the markets this week, China has a few reports due this week that may impact the price of copper.

Monday, May 28

Markets in the U.S. will remain closed for Memorial Day.

Tuesday, May 29

The U.S. Conference Board is to release data on consumer confidence.

Wednesday, May 30

In the eurozone, Germany is to release preliminary inflation data along with retail sales figures.

The U.S. is to release the ADP nonfarm payrolls report as well as the second estimate of GDP growth for the first quarter.

The Bank of Canada is to announce its latest monetary policy decision and publish its rate statement.

Thursday, May 31

China is to publish PMI data on manufacturing and service sector growth.

The euro zone is to release a preliminary inflation estimate.

The U.S. is to publish data on personal income and spending, which includes the personal consumption expenditures inflation data, as well as reports on initial jobless claims and manufacturing activity in the Chicago region.

Friday, June 1

China is to publish its Caixin manufacturing index.

The U.S. is to round out the week with the nonfarm payrolls report for May, while the Institute for Supply Management is to publish its manufacturing index.

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Jim Williams

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