Metals Update – 17 July

Last Week 

Last week, the Non-Ferrous Market experienced major bullish sentiment on the back of a very optimistic drop in US inflation numbers. Aluminium and zinc prices are set to achieve their most significant weekly gain since January this year, driven by a resultant weaker dollar that has made metals priced in USD more affordable for holders of European Currencies. The most notable movement in currency rates was that of GBPUSD, which saw highs of 1.31 in late trading last week.

Copper prices experienced a slight decline on at the end of last week, following two days of straight gains. The retreat can be attributed to concerns that the optimism surrounding a pause in interest rate hikes might be premature, coupled with the absence of additional stimulus measures in China, a prominent consumer of metals.

Three-month copper on the London Metal Exchange slipped by 0.5% to $8,650 /tonne. However, it had previously reached a recent three-week high of $8,729, demonstrating the strength of the market’s recent performance.

Investors had been relying on new stimulus measures in China, especially in light of lacklustre factory data and weak demand that have been exerting pressure on the market.

The Week Ahead

Looking ahead into next week, all eyes will be on the effect of anticipated US rate hike slow downs on global commodity Prices. The dollar has remained stagnant at its lowest point in 15 months following a significant plunge in the previous session. Market speculations suggest that the Federal Reserve is nearing the conclusion of its rate hike cycle due to easing inflationary pressures.

In a recent report, Financial Broker Sucden Financial emphasized the macroeconomic factors as the primary drivers of metal prices. The firm anticipates that the Federal Reserve’s forward guidance following the June meeting will set the tone for the central bank’s narrative throughout the year. They also mentioned that once the market has priced in the peak interest rate, attention is expected to shift back to China, where it will guide the prices. China, being the largest consumer of metals globally, has been experiencing weak demand that has impacted prices.

Foenix Partners, 26 Curtain Road, London, EC2A 3NY