Copper climbs as Fed rate hike odds shrink

Copper prices saw a slight uptick as traders scaled back their bets on another interest rate hike by the Federal Reserve. According to Reuters, three-month copper on the London Metal Exchange climbed 0.19%. This move came amid softer US jobs data, which reduced the likelihood of a rate hike at the upcoming Fed meeting to just 18%, down from 64% a week earlier, based on CME Group’s FedWatch tool.

The shift in Fed expectations helped copper hold steady despite a strengthening US dollar. A stronger dollar typically weighs on commodities like copper because it makes them more expensive for overseas buyers. However, the reduced likelihood of a rate hike provided some relief, offsetting the usual headwind from a stronger dollar. Other factors, such as energy prices and the closure of China’s markets for holidays, remained in the background.

For markets, the lower odds of a Fed rate hike may benefit copper more than aluminum. Copper often reacts to broad economic conditions, which can stay supportive even with a stronger dollar. In contrast, aluminum is influenced by supply dynamics, such as new production capacity in Indonesia, which could lead to a surplus and keep prices under pressure regardless of Fed policy.