LONDON: Copper prices hit their highest in two months and aluminium the highest in three on Thursday after the long-awaited US Federal Reserve’s interest rate cut weakened the dollar and gave support to growth-dependent metals.
Three-month copper on the London Metal Exchange rose 2.0% to $9,583 per metric ton by 0856 GMT after hitting $9,586.5, its highest since July 18. On the technical front, copper faces resistance from the 100-day moving average at $9,593.
The US currency fell, making dollar-priced metals more attractive for buyers using other currencies, as the Fed kicked off its monetary easing cycle on Wednesday with a larger-than-usual half percentage point reduction.
“There is a lot of debate on how to interpret the size of this rate cut because one can see it in two ways,” said Dan Smith, head of research at Amalgamated Metal Trading. “You can argue that it’s good news.
On the other way, you can argue that the Fed felt the need to act quickly to support the economy and that this signals that some weakness we are not yet aware of is coming. For now, the bullish interpretation is winning, but I expect copper to have a volatile session.“
He also said some algorithmic computer models that place buy and sell orders largely on momentum signals had switched to bullish mode.
Copper edges up on softer US dollar ahead of expected Fed rate cut
Leading metals consumer China’s economy, however, continues to send mixed signals for copper, used in power and construction, as the country’s construction sector struggles, although demand from its electrical sector is rising.
On the supply side, China’s August refined copper output rose 0.9% to 1.1 million tons.
LME aluminium climbed 0.9% to $2,558.50 a ton after hitting $2,569, its highest since June 13.
Zinc increased 1.9% to $2,940.50, nickel rose 1.1% to $16,405, lead climbed 1.7% to $2,066.17 and tin moved 1.0% higher to $31,880.
Source: Brecorder
