Expectations of Fed Rate Hikes Keep Market Cautious, Copper Prices to Face Resistance

LME copper prices closed at $8,970/mt overnight, a drop of 0.36%. Trading volumes were 14,000 lots and open interest stood at 253,000 lots. The most active SHFE 2305 copper contract finished at 69,580 yuan/mt overnight, down 0.03%. Trading volume was 17,000 lots, and open interest stood at 152,000 lots.

On the macro front, the U.S. dollar rose due to the rise in U.S. bond yields. But as the U.K inflation rate remained above 10% in March, the Bank of England continued to raise interest rates, making the pound rise against the U.S. dollar, limiting the dollar’s gains. In terms of fundamentals, the outflow of warrants in Shanghai was limited yesterday, which had little impact on spot premiums and discounts. In addition, the import loss narrowed to around 300 yuan/mt yesterday, and the market concerns about the continuous flows of imported copper into the spot market grew.

The market is worried about the pressure on spot premiums and discounts. In terms of consumption, lower SHFE copper prices failed to arouse the downstream buying interest, and only some low-priced goods were traded actively.

In terms of price, the domestic economy is expected to provide support for copper prices, and the high-end prices will be weighed by Fed rate hike. Copper prices are expected to remain rangebound.