The Copper Monthly Metals Index (MMI) fell 1.7%, as the copper demand picture could be set to weaken and the LME three-month and China primary cash prices fell month over month.
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The Fed effect and Congress delays
As the Federal Reserve prepares to scale down its pandemic strategy, copper prices dropped. The Fed reported it would hike rates and pare back the asset purchase program (i.e., quantitative easing).
This news benefited the U.S. dollar, which increased over the past month. This is particularly important to copper. The U.S. dollar and commodities have historically moved in a perfect inverse relationship.
Moreover, Congress’ decisions — or lack of them — could cause market turmoil and impact copper prices. The bipartisan infrastructure deal remains delayed in the House of Representatives. Congress has not taken action on increasing the debt ceiling, adding to the potential market turmoil, though it does appear that Republicans have agreed to a short-term debt ceiling cover into December.
China looming over prices
Meanwhile, the second-largest economy in the world continues to show signs of volatility.
China is the biggest consumer and producer of refined copper. Its latest issue involves a power crisis that has impacted both copper production and also manufacturing. Both have experienced restrictions.