In a positive turn, base metal prices, led by copper, experienced an upswing in London trading. This resurgence is attributed to brighter demand prospects emanating from China, a prominent base metals consumer. Despite the persistent pressure from a robust U.S. dollar, the market exhibited remarkable resilience.
Improved Chinese Demand Counters Strong Dollar’s Influence
Analysts noted a noteworthy 0.5% climb in three-month copper on the London Metal Exchange, reaching $8,404 per ton during official open-outcry trading. This encouraging trend over five consecutive sessions is back by multiple factors.
Notably, optimistic copper consumption data from China played a pivotal role, accompanied by speculations of additional support measures by the Chinese government. Moreover, currency interventions resulted in the strengthening of the yuan against the dollar, further fueling the positive sentiment.
The strong performance in sectors like power and construction was underscored by stockpile levels monitored by major futures exchanges.
Maintaining levels just above a 15-year low at 170,000 tons, these stockpiles provided a supportive backdrop for base metal prices.
However, a different scenario unfolded in the United States, where the annualized total of existing home sales for July fell below both expectations and previous values.
Deliberations among Fed officials revolved around potential consequences for the central bank’s credibility if it were to shift its inflation target. On the other hand, there’s growing anticipation of heightened support from the domestic central bank, lending buoyancy to market sentiment.
Simultaneously, the euro zone faced a more extensive decline in business activity, primarily in Germany, the region’s largest economy. This decline prompted the euro to weaken considerably against the dollar. While the dollar index achieved its highest level since June 8 against six major currencies.
This strengthening dollar dynamics increased the costs for buyers using other currencies to purchase dollar-priced metals.
From a technical perspective, copper’s progress is meet with resistance at the 21-day moving average, positioned at $8,433. Despite the prevailing challenges, base metal prices showcased their resilience, pivoting on China’s demand outlook while navigating the dollar’s influence