Copper prices see a downside below $3.70 on soaring recession fears

• Copper prices have continued their rangebound moves ahead of Caixin Manufacturing PMI.
• The base metal may display more losses as comments from central banks have lowered the demand forecasts.
• The inflation rate is not expected to return to 2% despite a solid US economy.

Copper Price, per the COMEX Futures, is displaying topsy-turvy moves in the Asian session. The base metal is oscillating in a narrow range of $3.7155-3.8455 this week after remaining in the grip of bears for the whole month. A sigh of relief doesn’t warrant a reversal as advancing recession fears are underpinning more slippage in the overall demand, and eventually in the copper prices.

The commentary from central banks in European Central Bank (ECB)'s annual Forum on Central Banking has cleared that a higher inflation rate will stay for a prolonged period and currently, the households are facing the headwinds of diminished real income.

ECB President Christine Lagarde has cleared that after recognizing the inflation rate above 8%, it is unlikely to return to the environment of low inflation rates. Also, Federal Reserve (Fed) chair Jerome Powell dictated that to cool down the hot-red inflation, a quick rate hiking process is necessary. However, that doesn’t guarantee an inflation rate of around 2%. It will take time but the market participants will start understanding that high inflation rates are a new normal now. Also, this will keep the US dollar index (DXY) at elevated levels for a longer period.

Going forward, investors are focusing on the release of the Caixin Manufacturing PMI, which is due on Friday. A preliminary estimate for the economic data is 50.1, higher than the former figure of 48.1. A higher-than-estimated figure will support the copper prices as it will dictate higher usage of copper in June.