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The Dollar Muscles Copper Lower

The Dollar Muscles Copper Lower

A stronger dollar helped push copper prices down to end last week, causing the red metal to suffer its first weekly loss in eight weeks. The trend continued this week, but the tide appears to be turning.

Copper prices rose in overnight trading after top consumer China unveiled economic stimulus measures including tax cuts for the manufacturing industry, bolstering the demand outlook. This, in addition to expectations the United States and China are “on the cusp” of a deal to end the tariff tiff that has caused the price of copper to yo-yo since last summer.

U.S. Secretary of State Mike Pompeo is attributed to saying a deal is near. “I can’t tell you exactly how close we are, but real progress has been made for sure,” he told reporters in Iowa. Headlines across the globe this morning predict a deal could be done in as little as a couple of weeks. We will keep an eye on the negotiations and any impact they will have on copper as the saga continues.

In the meantime, benchmark copper on the London Metal Exchange (LME) was up 0.8 percent at $6,461.50, reversing Monday’s losses and approaching a seven-month high of $6,540 reached last week.

The Chinese stimulus measures, which included promises of infrastructure spending, were largely expected and come as overall economic growth is cooling, with Beijing saying it targets growth of 6-6.5 percent this year, down from 6.6 percent in 2018.

“For copper to really rally, China will have to move from talk to delivery on its stimulus pledges,” ING analyst Warren Patterson told Reuters, predicting that copper would average $6,400 a ton for April-June and rise later in the year.

Copper opened this morning at $2.92 a pound. Click on the chart below for the latest price.

This week traders will closely monitor movements in the U.S. dollar, one of the biggest drivers for copper, ahead of a U.S. jobs report that could underline the Federal Reserve’s case for patience when it comes to future interest rate hikes.

Here is a list of significant events likely to affect the markets as compiled by Investing.com.

Monday, March 4

Australia released reports on building approvals and company operating profits.

The eurozone published Sentix investor confidence data and figures on producer prices.

The U.K. released a report on construction sector activity.

Tuesday, March 5

China is to release its Caixin services index.

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.

The U.K. is to release data on service sector activity.

The U.S. is to produce data on new home sales and the Institute of Supply Management is to release its index of non-manufacturing activity.

Bank of England Governor is due to testify before the House of Lords in London.

Wednesday, March 6

Australia is to publish figures on fourth-quarter economic growth.

The U.S. is to release data on ADP nonfarm payrolls.

Both Canada and the U.S. are to produce trade figures.

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

New York Fed President John Williams is to speak at an event in New York.

The Fed is to release its Beige Book, which contains insights on business activity.

Thursday, March 7

Australia is to publish figures on retail sales and trade.

The European Central Bank is to announce its benchmark interest rate and publish a rate statement. The policy announcement is to be followed by a press conference with President Mario Draghi.

Canada is to report on building permits.

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

Fed Governor Lael Brainard is to speak.

Friday, March 8

China is to publish its latest trade figures.

Canada is to publish its monthly employment report.

The U.S. is to round up the week with what will be a closely watched nonfarm payrolls report, along with figures on building permits and housing starts.

Further Reading

Copper is shining, but what’s on the horizon? It’s been a bright year for the red metal, but with the demand for electric vehicles forecasted to increase significantly, what is on the horizon for copper? Check out this article from Proactive Investors.

Plus, you’ve heard of the red metal referred to as Dr. Copper, but King Copper? Could it be crowned royalty in 2019? Check out this Forbes article.

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Jim Williams

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