Copper prices recover on USD pullback, firmer China data, US inflation eyed

• Copper picks up bids as market sentiment improves during pre-CPI inaction.
• China’s inflation numbers, announcements from Shanghai also underpin metal’s rebound.
• USD eases on softer yields, mixed Fedspeak ahead of expectedly soft US CPI.

Having paused the bearish trajectory the previous day, copper prices improve during early Wednesday amid hopes of softer US inflation, as well as improvement in the covid conditions of its largest customer China. Also favoring the metal’s price rebound are the softer US Treasury yields and the US dollar, as well as mildly bid equities.

That said, the benchmark three-month copper on the London Metal Exchange (LME) gains over 1.0% with the latest price being $9,330. Also, the most active June copper futures contract on Shanghai Futures Exchange (SFE) rises around 0.40% to 71,650 yuan (Approximately $10,660).

Headlines from Shanghai local authorities that mentioned no virus spread in eight districts and firmer inflation numbers from the dragon nation seem to help the red metal pick up bids. That said, China’s Consumer Price Index (CPI) rose past the 1.8% market consensus to 2.1% YoY whereas the Producer Price Index (PPI) crossed 7.7% expectations with the 8.0% yearly.

Mixed comments from Federal Reserve policymakers and downbeat US inflation expectations, as per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, weigh on the US dollar and offer additional strength to the copper prices.

That said, the US 10-year Treasury yields and the US Dollar Index (DXY) remain pressured at around 2.99% whereas the S&P 500 Futures print mild gains near the 4,000 level after a mixed closing on Wall Street.

Furthermore, worker strikes in Peru’s one of the key copper mines also keep the metal buyers hopeful. “Peru's government on Tuesday failed to reach an agreement with a group of indigenous communities whose protests have halted operations at MMG Ltd's massive Las Bambas copper mine,” per Reuters.

Alternatively, the market’s inflation fears ahead of the US Consumer Price Index (CPI) figure, expected to ease to 8.1% YoY from 8.5% prior, join the overall hawkish approach of major central banks and likely negative impacts of the same on the growth weigh on copper.

Further, China’s covid conditions are grim and hence test the metal prices due to Beijing’s status as the world’s largest industrial player. “China's April copper cathode output fell on both a monthly and annual basis, state-backed research house Antaike said on Tuesday, as maintenance and the COVID-19 outbreak in the country curbed smelters from producing more metal,” said Reuters.

To sum up, copper’s latest rebound has more negatives to face ahead and a disappointment from the US inflation could be all to recall the metal bears.

Read: US April CPI Preview: Has inflation peaked?