Copper price grinds higher amid firmer DXY, mixed concerns over China

• Copper struggles to extend Friday’s rebound amid off in Japan and the UK.
• PBOC announces RRR cut, Dalian and Chengdu witness unlock but Taiwan concerns amplify China-linked fears.
• Oversupply fears, hawkish Fed bets exert downside pressure on the metal prices.

Copper price remains sidelined amid a sluggish start to the key week as traders struggle to justify mixed catalysts during the holidays in Japan and the UK.

That said, the three-month copper on the London Metal Exchange (LME) rose 0.5% to $7,804 a tonne by 03:25 GMT, per Reuters, whereas the most-traded October copper contract on the Shanghai Futures Exchange (SFE) advanced 1% to 62,650 yuan ($8,940.42) a tonne. On the contrary, the COMEX Futures drop 0.60% by the press time.

US President Joe Biden’s comments that he is more optimistic than I have been in a long time initially favored the red metal. The national leader also stated that they are going to get control of inflation. On the same line are the covid updates from China as it unlocks Dalian and Chengdu cities while witnessing zero coronavirus cases in Beijing and one, versus zero the previous day, outside Shanghai’s quarantine zone. However, US President Biden’s readiness to back Taiwan in case China attacks Taipei and the hawkish hopes for the Fed seem to weigh on the steel price ahead of the key monetary policy announcements.

Further, the People’s Bank of China (PBOC) cuts the 14-day reverse repo rate by 10 basis points (bps) to 2.15%. “With no reverse repos maturing on Monday, China central bank injects 12 billion yuan on the day,” per Reuters. The same might have signaled that the dragon nation isn’t in recovery mode and needs more rate cuts than the rate hikes, which in turn could have drowned the gold price. The reason is China’s status as one of the biggest gold consumers in the world.

Elsewhere, hawkish hopes from the Fed also weigh on the metal prices, especially amid recession fears. On Friday, the University of Michigan's preliminary readings of Consumer Sentiment for September came in at 59.5, up from 58.6 in the prior month while easing below 60.0 market forecasts. With the firmer US data, the odds of the Fed’s 75 basis points rate hike (bps) rose to nearly 80% while the market’s expectations of a full one percentage increase in the Fed rate rose to 20% at the latest.

Looking forward, headlines surrounding China may entertain copper traders but major attention will be given to the central bank actions from the US, the UK and Japan as the former two bear hawkish expectations and can drown the metal prices.

Also read: Steel price rebounds on covid updates, comments from Fitch on China