Dalian iron ore jumps 5.0% on cautious optimism, China news

• Dalian iron ore snaps two-day downtrend, spot prices dwindle.
• China vouches for economic stability during Central Economic Work Conference.
• Omicron updates contradict US inflation data to challenge commodity traders.
• AUD/USD struggles to cheer the run-up in main export item amid firmer yields.

Iron ore futures for May 2021 delivery rises past 5.0% to 671 yuan ($105.46) per ton during early Monday morning in Europe. In doing so, the key steelmaking ingredient marks the first daily jump in three while taking clues from China.

During the 2021 Central Economic Work Conference, Chinese officials showed readiness to use monetary and fiscal policy tools to stabilize the world’s second-largest economy in 2022. Given the dragon nation’s status as the world’s largest commodity user, its readiness to spend more ultimately helps the iron prices.

It should be noted, however, that the spot prices aren’t much impressed as Reuters quotes SteelHome consultancy to say, “Spot prices of iron ore, with 62% iron content for delivery to China, dipped $1 to $108 per tonne on Friday.”

The reason could be linked to the market’s cautious sentiment ahead of this week’s key monetary policy meeting by the US Federal Reserve (Fed).

That said, the market sentiment remains divided as Friday’s consumer-centric data favored bulls but the Omicron updates keep fears of supply outage and inflation rush on the table, favoring the needs of the tighter monetary policy.

It’s worth observing that iron ore is Australia’s biggest export item and any move in the prices should ideally affect the AUD/USD. As a result, the Aussie pair reverses the early Asian losses to jump back towards the 0.7190 upside hurdle.

Read: AUD/USD Price Analysis: Mildly offered below 0.7190 upside hurdle

Moving on, commodity traders should pay attention to the virus updates and the China news for intermediate clues before the Fed meeting. In a case where the FOMC members cite Omicron fears and disappoint markets, by not announcing a faster tapering, the commodity basket will have a few more good days.