Copper Prices: Better China Data Supports, Stronger USD Weighs
Copper prices were initially stronger on the week benefiting from better Chinese data. The China Manufacturing PMI for February came in at 51.6 vs. 51.2 expected while the Caixin PMI was also stronger at 51.7 vs. 50.8 expected. Data from China has been increasingly positive over recent weeks and is fuelling a boom in demand for Copper as investors speculate that the positive momentum in the economy will translate into increased construction and manufacturing activity.
Further support came from Donald Trump’s speech before Congress where he promised to ask the house for a $1trln infrastructure investment. The metals complex soared last year in response to Trump’s election and his proposed increase in infrastructure expenditure which is now set to be significantly bigger than the initially stated $550bln figure.
Despite the stronger start to the week, Copper prices retraced lower on Thursday as an uptick in Fed rate hike expectations fuelled a rally in the US Dollar. Fed’s Brainard reiterated the message contained in the January FMC minutes saying that rates can rise “soon.” Market pricing of a March rate hike has now jumped from around 34% at the start of the week to over 70% heading into the weekend.
Copper prices continue to consolidate just below the prior 2016 high. For now, the focus remains on the upside, and the next key objective for bulls will be a test of the bearish trend line from 2011 highs alongside the 2015 high at 2.963.
Iron Ore: Quiet Markets Despite Rising Coal
Iron markets have been particularly quiet this week with little movement marking a distinct contrast from the wild swings seen over the last year as market volatility has increased. Even rising coking coal prices haven’t had much impact on the iron prices. One question which is growing in discussion is whether or not the rally in iron prices will see a reopening of Chinese mines which had closed down when the sector began to deteriorate years ago. A renewal could help Chinese steel mills shrink their raw material import costs which would boost margins as steel prices rise.
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