Copper futures prices broke through previous high amid falling US dollar

LME copper prices briefly surged and then fell back on the heels of the restrictions imposed by the UK and the US on Russian metals trading. SHFE copper prices did not rise sharply after opening in the week ending April 19. On Monday, the US retail sales rate for March was 0.7% month-on-month, exceeding market expectations of 0.3%. The Federal Reserve is "not in a hurry to cut interest rates this year". The US dollar received strong support and broke through 106 before hitting a high of 106.5. Although it subsequently gave up some of its gains, it was still hovering around 106. The Beige Book showed that the US economy has "expanded slightly" since the end of February, and consumers are still very sensitive to prices; however, the economic situation released in the Beige Book seems to be inconsistent with the actual data released by the US earlier. The market is still concerned about whether the US economy can smoothly achieve a soft landing. In the second half of the week, the US dollar gave up its gains and fell below 106. Luis de Guindos, a member of the European Central Bank's Executive Board, said that further declines in inflation would support interest rate cuts this year and the probability of a rate cut by the ECB in June increased; the euro fell significantly against the US dollar during the week and rebounded slightly in the second half of the week.

In the Chinese market, China's annualised GDP in the first quarter recorded 5.3%, and China's annualised total retail sales of consumer goods in March increased by 3.1%. The GDP in the first quarter was mainly driven by the improvement of industry and services, and both domestic and overseas demand showed a significant rebound. The steady improvement of the domestic economy is beneficial to the domestic macro sentiment. On April 18, the People's Bank of China (PBOC) responded to the recent fluctuations in the RMB exchange rate and stated that there is still room for future monetary policy, improving market confidence; A-shares hit 3,100 during the day. Copper prices also hit new highs driven by macroeconomic factors. LME copper prices broke through $9,700/mt and SHFE copper prices exceeded 78,000 yuan/mt.

On the fundamentals, the tight ore supply and the downward trend of TCs continued. The high copper price has reduced new orders for copper processing companies. The large spot discounts remained in mid-to-late April, and SMM data showed that China's copper cathode social inventory was still increasing. With the recent opening of the copper cathode export window, smelters have actively exported, which has increased bonded area inventories and thus reduced domestic supply to a certain extent. However, after the delivery of the SHFE 2404 copper contract, SHFE still has a high volume of futures warehouse warrants. Spot traders are still under pressure.

In the week of April 22, PMI data from many countries and PCE data from the US will be released, and the Bank of Japan will announce its interest rate decision and outlook report. There are no obvious signs of a correction in copper contract prices. It is expected that in the week of April 22, LME copper prices will trade at $9,500-9,850/mt, and SHFE copper prices will trade at 77,000-79,550 yuan/mt. Spot trades will remain poor under the influence of high copper prices, and the spot discounts are expected to be 250-150 yuan/mt.