Consumption Expectations Have Not Been Fulfilled, Macro Sentiment Dominated Copper Prices

SHANGHAI, Feb 20 (SMM) - The recent spectacular employment data in the United States, the higher-than-expected inflation rate, and resilient consumption data have made the market gradually realise that anti-inflation is a protracted battle. Coupled with the "hawkish" speeches of Federal Reserve officials, foreign investment institutions have adjusted their expectations for future interest rate hikes by the Fed. The US dollar stemmed declines and rebounded to above 104.5 during the week, capping the gains of copper futures prices.

In Europe, the European Commission raised its economic growth forecast for the EU and the eurozone to 0.8% and 0.9% this year respectively. Although the European Commission is relatively optimistic about the economic growth in Europe this year, the European economy still faces multiple challenges, especially the uncertainty brought about by the Ukraine crisis. In China, the People's Bank of China (PBOC) announced on February 15, 2023 that in order to maintain reasonable and sufficient liquidity in the banking system, it initiated a 499 billion yuan medium-term lending facility (MLF) operation and a 203 billion yuan open market reverse repurchase operation on February 15. The operation fully met the needs of financial institutions, and the domestic macro economy remained positive.

Fundamentally, a recovery has been seen across the entire industry chain, but the pace of recovery is slower than expected. New orders from end-users were limited, and most of the market players across the copper industry chain restocked on demand.

In aggregate, the domestic macroeconomic expectations remain positive, but the continued gains of the US dollar during the week have prevented copper prices from reaching higher levels. The market shall keep an eye on the important data in the United States due this week, such as the US producer price index and the core PCE price index. If the data exceed market expectations, the dollar will continue to strengthen and put pressure on copper prices. The most active SHFE copper contract prices are expected to move between 67,500-69,500/mt this week, and LME copper will trade between $8,800-9,050/mt.