- Copper prices have renewed their 15-months low at $3.86 on advancing recession fears.
- More policy tightening measures by the central banks will shrink the aggregate demand.
- The resurgence of Covid-19 in China is impacting their manufacturing sector and henceforth the copper demand.
Copper, prices on COMEX, have witnessed a steep fall in the Asian session. The base metal has surrendered the potential cushion of $3.90 and has renewed its 15-month low at $3.86. The asset is declining firmly and is expected to find a cushion much lower.
The policy tightening approach adopted by the Western leaders to fix the inflation mess has brought a significant fall in the asset. The inflation rate is advancing at a runaway pace and central banks are featuring rate hikes to tighten their grip on the injection of liquidity into the economy. The unavailability of helicopter money into the economy along with costly funds will force the corporate sector to put more filters on their investment plans. More filters on the investment projects will leave few investment plans for the corporate and therefore a slippage in the demand for copper.
Meanwhile, the zero-Covid policy in China has raised concerns over the demand for copper. The Chinese economy is fighting the resurgence of Covid19 for the past three months. This has brought a major drop in manufacturing activities. It is worth noting that China consumes more than 50% of the total copper production and a slump in China’s demand has a significant impact on the copper prices.
On the dollar front, the US dollar index (DXY) is holding itself above 104.00 on growing expectations of one more 75 basis points (bps) rate hike by the Federal Reserve (Fed) in July. Fed chair Jerome Powell in his testimony on Wednesday has cleared that bringing price stability is their top priority and June’s rate hike extent could be repeated in July.