(June 18): Copper fell more than 1% to wipe out the gains of earlier this week after US Federal Reserve chair Kevin Warsh sparked speculation about rate hikes.
For metals, that quashed a burst of bullish sentiment after the US and Iran agreed to sign an interim peace agreement. Oil prices slumped on Thursday, further calming worries about the war’s impact on the global economy.
Still, in his first press conference as the head of the Fed, Warsh repeatedly emphasised the central bank’s commitment to fighting inflation, prompting rate futures traders to fully price a quarter-point hike by October.
The movements cap what has been a stark shift in the market’s expectations for the direction of US monetary policy over the past few months, one that’s persisting even as oil prices pull back. That’s because energy prices have only been one factor keeping inflation stubbornly above the Fed’s target.
The outlook for the Fed’s moves has a global bearing on commodities markets, with higher rates raising costs for importers who need to pay for copper and other goods in dollars. The copper market is also benefitting from a surge in investment in data centres in the US and elsewhere, and higher rates could raise worries about the pace of that spending.
Copper on the London Metal Exchange was down 0.8% to US$13,710.50 a tonne by 10.54am local time, while aluminium and zinc edged lower.
See also: Crop prices drop as Hormuz reopening to ease farm input shock
Separately, a short blockade of copper shipments from Rio Tinto Group’s giant Oyu Tolgoi mine in Mongolia has ended. Protesters had blocked the road that carries copper concentrate for export to smelters in China.
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