Copper price improves further on supply-demand, China concerns

• Copper price stays mildly bid at monthly high, reverses pullback from one-week high.
• Depleting inventories, heat wave in China restrict supplies of industrial metal.
• Expectations of more stimulus from China join a pullback in yields, DXY to underpin the mild gains.

Copper price seesaws around one-week high, reversing the previous day’s pullback, as softer US dollar joins hopes of more supply crunch. Adding strength to the recovery moves are the hopes that China could announce more stimulus to defend the world’s second-largest economy from recession.

That said, copper futures on COMEX print mild gains around $3.6570, up 0.10% intraday, whereas the three-month copper on the London Metal Exchange (LME) matches the move with the latest quote being around $8,040.

The energy crisis in Europe, China’s readiness for further stimulus and depleting inventories are some of the top-tier catalysts that have recently defended the copper price. It’s worth noting that the latest heat wave in China forces many metal producers to stop manufacturing plants and hence portray the supply crunch, as well as lead to a reduction in stockpiles.

Alternatively, hawkish Fed bets and chatters that China won’t be able to tame economic slowdown amid broad pessimism seem to challenge the metal buyers. On the same line could be the concerns surrounding the Russia-Ukraine tussles. Reuters quotes an anonymous US official to mention that Russia is preparing strikes on Ukraine's infrastructure in the coming days. Meanwhile, the New York Times (NYT) reported that the US is sending more weapons to Ukraine to aid counterattack.

Amid these plays, the market sentiment remains unclear and hence troubles the metal traders. As a result, today’s preliminary S&P Global PMIs from the UK, Eurozone and the US, for the August month, will be important for fresh impulse. Also in-line for publishing are the US New Home Sales for July and Richmond Fed Manufacturing Index for August. Above all, Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, up for publishing on Friday, will be crucial for the market as a whole.

Should the economic fears stop Fed’s Powell from favoring the 0.75% rate hike in September, the copper prices may witness further upside due to its inverse relationship with the US dollar.