Copper and other industrial metals experienced extended losses, with copper falling as much as 2.1% on the London Metal Exchange. This decline was primarily attributed to a stronger US dollar, which saw its value increase by nearly 1% this week, and the Federal Reserve's hawkish monetary policy stance.
The growing belief that interest rates will remain elevated acts as a significant headwind for various risk assets. This impact is compounded for commodities like copper, which are priced in US dollars, as a stronger dollar makes them more expensive for international buyers.
While copper had seen some upward movement the previous day, touching a seven-week low before edging higher due to a weakening dollar and an AI stock rally, the overall trend points to pressure from macroeconomic factors. Earlier in May, copper had also retreated from record highs after accelerating US inflation reduced the likelihood of rate cuts and a stronger dollar made the metal more costly for buyers. This followed an eight-day run of gains driven by mine disruptions and optimism about AI-driven demand.
