Copper prices bounced back on Friday after data showed U.S. inflation was steady, giving more confidence that the Federal Reserve may cut interest rates this year and weighing on the dollar. However, earlier, weak manufacturing data in top metals consumer China had weighed on copper prices.
Three-month copper on the London Metal Exchange was up 0.3% to $10,164 a metric ton at 1330 GMT, having slipped nearly 9% since touching a record high of $11,104.50 on May 20. The positive move came after data showed the U.S. core personal consumption expenditures price index, which the Fed uses to gauge underlying price pressures, rose in line with expectations.
This spurred traders to increase bets that the Fed would deliver a rate cut in September and pushed down the dollar index, making commodities priced in the U.S. currency less expensive for buyers using other currencies. “If the number had come in hotter than expected, the market may have pushed out forecasts for rate cuts, possibly to 2025,” said WisdomTree commodity strategist Nitesh Shah.
Earlier, China’s manufacturing activity fell unexpectedly in May, with the official manufacturing purchasing managers’ index (PMI) dropping to 49.5 from 50.4 in April, below the 50 mark that separates growth from contraction. “The Chinese numbers, being so soft and coming in below 50, might be something that make people reassess their demand forecasts from China,” Shah said.
Despite the recent losses, LME copper has gained nearly 2% this month and about 19% this year, fueled by speculators and a short squeeze on the U.S. Comex exchange that sent prices to a premium of about $1,000 over LME levels. Comex prices have declined more than LME prices in recent days, narrowing the gap to about $180 a ton.