Steel price remains pressured as recession woes join hawkish Fed bets

• Steel price fades the previous day’s rebound from monthly low.
• Risk-off mood, hawkish Fed bets propel US dollar, weighing on steel price.
• Covid woes, emission-lined production jitters add to the negative catalysts.

Steel price holds lower ground near the monthly low, reversing the previous day’s bounce, as risk-aversion joins hawkish bias on the Fed’s next moves and pessimism surrounding China to weigh on the metal prices. That said, the mixed clues and anxiety ahead of the top-tier data/events seem to restrict the quote’s latest moves during Wednesday’s Asian session.

That said, the most active contract of steel rebar on the Shanghai Futures Exchange (SFE) drops to 3,658 yuan per tonne at the latest.

“Most base metals in Shanghai slid on Wednesday, dragged by a stronger dollar and a bearish demand outlook amid worries about a recession in major economies,” per Reuters.

Alternatively, growing fears of economic slowdown, amid the energy crisis and China’s covid woes, join the firmer US data and hawkish Fed bets to weigh on the metal prices. That said, US ISM Services PMI rose to 56.9 versus 55.1 market forecast and 56.7 prior. However, the S&P Global Composite PMI and Services PMI eased to 44.6 and 43.7 respectively versus 45.0 and 44.1 initial forecasts in that order. Even so, the US Dollar Index (DXY) rose after the release and refreshed a 20-year high.

That said, the DXY stays firmer around the highest levels in 20 years, up 0.22% intraday near 110.50 at the latest. Recently, the CME’s FedWatch Tool signals 72.0% chance of 50 basis points (bps) Fed rate hike in September versus 57% one-day ago.

Moving on, China’s trade numbers for August will precede the Fedspeak to direct short-term moves in steel prices.