SHANGHAI, Jul. 23 (SMM) – The People’s Bank of China (PBOC) surprised the market by announcing last weekend that it will abolish the minimum lending rate of financial institutions. This will help ease tightness in liquidity, boosting market sentiment. Existing home sales in the US fell by 1.2% in June, far worse than forecasts. This raised anticipation that the US Federal Reserve will keep QE in place for the foreseeable future. The US dollar index dipped as a result, pushing base metals prices higher. LME aluminum broke through the 60-day moving average to a high of USD 1,863/mt during the European session, a gain of more than 2%. LME aluminum, however, surrendered earlier gains at the tail of the session as longs took profits, and finally ended the day at USD 1,842/mt, up USD 16.5/mt or 0.90%. Positions decreased 462 lots to 740,266 lots. LME aluminum inventories were down 8,575 mt to 5,469,150 mt.
A softer US dollar will provide upward momentum to aluminum prices. LME aluminum will struggle at USD 1,850/mt and move within USD 1,830-1,870/mt on Tuesday. SHFE 1310 aluminum contract is expected to open higher at RMB 14,400/mt, with prices between RMB 14,350-14,450/mt. In spot market, weak demand will curb gains of spot aluminum prices. Spot discount of RMB 0-40/mt is expected over SHFE 1308 aluminum contract prices.