LONDON: Copper prices slipped on Thursday while the dollar steadied after the Federal Reserve pushed back a potential interest rate cut to the end of the year.
Three-month copper on the London Metal Exchange (LME) was down 1.3% at $9,815.5 per metric ton at 1458 GMT. The dollar gained strength although the US producer price index (PPI) fell unexpectedly in May to suggest easing price pressures. On Wednesday, May’s US consumer price index (CPI) was also softer than expected.
Slower inflation typically boosts hope for rate cuts and pressure the dollar. But, optimism over cooling inflation was not enough to keep the dollar down after the Fed’s hawkish statement to keep higher interest rates longer.
“Sentiment was bullish after the US inflation data yesterday but then the Fed statement after the LME close suggested that there would only be one cut this year,” said Robert Montefusco at Sucden Financial. Montefusco said profit-taking over the last few weeks had weighed on prices, with $9,500 a key support level.
“Prices will be rangebound until we get better numbers out of the China market on the demand narrative,” he said. Indicators include the purchasing managers’ index that gauges the manufacturing activity of top metals buyer China and due at the end of the month. Before that, there will be China’s loan and total social financing. which indicates credit availability for businesses.
Copper buyers are still not back in the market, although prices have retreated 11% from an all-time high of $11,104.5 in May. “Markets seem to be reverting their focus back to fundamentals. These do not look all that inspiring,” Ed Meir, a consultant of brokerage Marex said in a note on Thursday.
Meir cited traders that copper scrap- an usual substitute to refined copper when prices are high- “are not moving out easily”, with demand from automobile sector particularly weak. Lackluster demand is also reflected in rising inventory.
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