Copper futures reached their highest since August 17 in early Thursday morning trading in the US following the Federal Reserve’s decision to keep interest rates steady, which led to the dollar selling off.
Copper for December settlement on the Comex division of the New York Mercantile Exchange jumped 3.90 cents or 1.8 percent to $2.1940 per pound. Trade has ranged from $2.1605 to $2.1965.
Despite an improving labour market and fledgling signs of inflation, the Fed decided economic conditions did not warrant higher interest rates. The dollar subsequently erased Friday’s uptick and continued lower today – the dollar index was last at a one-week low of 95.14.
“[The Fed announcement] provided a relief rally to metals markets as policy makers left interest rates unchanged overnight, scaling back forward projections for hikes as the US dollar naturally weakened against its major counterparts,” a trader said.
In trade data, Chinese imports of unwrought copper and copper alloy rose 1.5 percent year-on-year but fell 3.2 percent month-on-month to 300,000 tonnes in August, according to the country’s General Administration of Customs.
The metal also largely ignored a report from the International Copper Study Group showing the global refined copper industry was in a production deficit of around 306,000 tonnes in the first half, which equates to a seasonally adjusted deficit of about 227,000 tonnes.
“We remain constructive on copper over the next month because some indicators suggest that the physical market is picking up while speculative sentiment has turned more positive. We will go with the flow,” Boris Mikanikrezai, metals analyst at FastMarkets, said.
“Still, we remain bearish over the next three-six months – we feel the current buying pressure is not being driven by a meaningful tightening in the global supply/demand balance,” he added.
The pace of economic data picks up today. US weekly unemployment claims for September 8-15 at 252,000 were below the forecast of 261,000. Later, existing home sales, the HPI, the CB leading index and natural gas storage figures are all slated for release.
In European markets, Germany’s DAX and France’s CAC-40 were up two percent and 2.2 percent respectively while the dollar softened by 0.5 percent to 1.1238 against the euro.
In other commodities, light sweet crude (WTI) oil futures on the Nymex rose 93 cents or 2.1 percent to $46.27 per barrel while the most active Comex gold contract at $1,340.40 per ounce was up $9.00.
(Editing by Mark Shaw)