Copper Prices Drop as Inflation Data Raises Rate Hike Bets
Copper prices edged lower on Monday as hotter-than-expected US inflation data led traders to boost bets on a Federal Reserve interest rate hike. Futures on the London Metal Exchange fell by up to 0.6%, marking their first weekly decline since June.
The majority of major metal contracts also traded lower, influenced by a strengthening dollar and broader pressure on risk assets. Traders increased their bets on a rate hike at the Fed's meeting this week following Friday's inflation print, despite concerns about political pressure on the central bank.
Tighter monetary policy typically has a negative impact on non-yielding assets like metals. The premium paid for spot copper over 3-month futures narrowed to $4.50 a ton, indicating easing supply tightness.
Analysts at Sucden Financial Ltd. noted that 'copper is likely to remain choppy around current levels until stronger dip-buying returns or a fresh macro or fundamental catalyst provides clearer direction.'