Copper prices displayed notable fluctuations this week, driven by a confluence of global economic factors, most notably China’s industrial data and movements in the US dollar. On Thursday, the London Metal Exchange’s (LME) three-month copper contract experienced a marginal uptick of 0.1%, while the Shanghai Futures Exchange’s (SHFE) December copper contract recorded a slight decline of 0.3%.
The intricate shifts in copper prices can be attributed to a range of influences. A robust industrial output report from China on Wednesday initially propelled copper prices to nearly six-week highs. However, apprehensions surrounding China’s property sector, coupled with a strengthening US dollar, imposed constraints on these gains. The dollar’s continued resilience on Thursday, fueled by robust US retail sales data and indications of decelerating inflation, contributed to a minor retracement in copper prices.
The strength of the dollar holds particular significance for commodities priced in the currency, determining their affordability for holders of other currencies. Throughout the week, the US dollar faced weekly losses, prompted by discouraging US economic data, hinting at a potential relaxation of the Federal Reserve’s tight monetary policy stance. Such a shift could render dollar-priced commodities, including copper, more accessible for international buyers.
In China, sustained declines in home prices over the past four months have raised concerns about demand, potentially impacting copper consumption in the world’s largest consumer of the metal. Additionally, ANZ Research highlighted that an uptick in domestic production of refined copper in China could further shape market dynamics.
Various metals traded on both the LME and SHFE experienced diverse price movements. SHFE lead defied the trend with an increase, while aluminum, nickel, zinc, and tin encountered declines on both exchanges.
Looking ahead, market participants are closely monitoring several key events that could influence market dynamics. These include upcoming UK retail sales data, a keynote speech by European Central Bank President Christine Lagarde at the 33rd Frankfurt European Banking Congress, and the release of US Housing Starts Number for October. The Bank of England’s Megan Greene is also slated to participate in a panel discussion on the monetary policy outlook, and final data for EU HICP for October is scheduled for release.
The trajectory of market trends is anticipated to continue being shaped by the interplay between dollar dynamics and China’s copper production activities amid broader global economic developments.
