Copper gains as Fed rate hike expectations cool

Copper prices edged higher on Monday, benefiting from improved demand prospects as expectations of a US Federal Reserve interest rate hike in October diminished. The benchmark three-month copper contract on the London Metal Exchange rose 0.19% to $14,286 per metric ton by 0300 GMT. The shift in market sentiment followed weaker-than-expected US jobs data last week, which reduced the likelihood of a rate hike to combat inflation. According to the CME’s FedWatch tool, the probability of a rate hike this month dropped to 18%, down from 64% a week earlier.

The stronger US dollar, which reached a near 17-month high, posed some pressure on copper prices. The dollar index gained 0.53%, making dollar-denominated commodities more expensive for buyers using other currencies. However, copper prices found support as oil prices fell, easing inflationary concerns. Rising Middle East crude exports and a release of oil stocks by the Group of Seven nations boosted supplies, contributing to the decline in oil prices.

Other industrial metals also saw mixed movements. Aluminium fell 0.19%, on track for a sixth consecutive day of declines, hitting its lowest level in over three months. Aluminium prices have dropped more than 18% since peaking in June due to easing supply concerns from the Gulf region and expectations of new production capacity in Indonesia. Among other LME metals, zinc lost 0.44%, lead added 0.3%, nickel was little changed, and tin added 0.24%. The Shanghai Futures Exchange remained closed for China’s National Day and will reopen on October 8.