Copper prices fell further amid lack of market confidence in domestic demand and strong US dollar

The Federal Open Market Committee (FOMC) decided to keep interest rates steady, maintaining the benchmark policy range at 5.25-5.5%. There is the possibility of another interest rate hike this year, as rising oil prices have brought some resistance to controlling inflation in the United States. The Federal Reserve announced its future economic expectations, predicting that the US economy will still show moderate growth this year and next. Real GDP growth is expected to be 2.1% this year and 1.5% next year. After the announcement of the interest rate decision and summary of economic expectations fuelled market expectations for a soft landing of the US economy. The US dollar index strengthened and exceeded the 105 mark.

The eurozone raised interest rates by 25 basis points two Thursdays ago. This is the tenth time the European Central Bank (ECB) raised interest rates since it started its interest rate hike cycle. The ECB said that although European inflation is on a downward path, it is still some distance away from the target. Due to the rebound in energy prices, the decline in inflation in the eurozone is far slower than expected. As such, Europe will still maintain high interest rates for the foreseeable future.

In China, Wuhan and other cities have once again relaxed real estate purchase restrictions, boosting market trading. The continued depreciation of the yuan reflects the market’s concerns about the weak long-term domestic economic situation to a certain extent. Fundamentally, the overall demand is not strong despite the peak season. Downstream buyers continued to purchase as required due to the lack of confidence over future market demand. Overseas, European and US economies are gradually cooling down, and copper consumption is marginally weakening, causing stock accumulation at LME warehouses in Europe and the US. This weighed on copper prices.

The strong US dollar index will limit the rise of copper prices. China's consumption is still resilient. However, the market lacks confidence in the continued recovery of demand and is cautious in restocking. The most active SHFE copper contract prices are expected to move between 67,500-69,000 yuan/mt this week (September 25-28), and LME copper will trade between $8,000-8,350/mt. Buying on the dip will bolster spot premiums to 50-150 yuan/mt this week.