Copper and other industrial metals experienced losses, with copper falling as much as 2.1% on the London Metal Exchange. This downturn was primarily attributed to a strengthening dollar, which extended its weekly gain to nearly 1%, and the Federal Reserve's hawkish stance, indicating that interest rates are likely to remain elevated. Higher interest rates are generally a headwind for risk assets, and a stronger dollar makes commodities priced in the currency more expensive for international buyers.
Earlier in June, copper prices saw an uplift due to progress in US-Iran peace talks. On June 22, copper prices rose after Iran announced "major progress" in negotiations with the US, fostering expectations of normalized traffic through the Strait of Hormuz and easing inflation concerns. An interim agreement between the US and Iran was reported on June 15, which saw copper surge 4.4% on optimism for global growth and the resumption of metal shipments through the strait.
Despite the recent decline, copper had also seen some gains on June 25, edging higher after touching a seven-week low. This modest increase was driven by a weakening dollar and a rally in artificial intelligence stocks, which buoyed sentiment for the metal often used in electrification. Additionally, easing tensions in the Middle East, such as Iran and Israel agreeing to halt strikes, contributed to a rise in copper prices earlier in the month by boosting risk appetite.
The volatility in copper prices reflects a market grappling with conflicting signals. While geopolitical developments and a weaker dollar can provide temporary boosts, the overarching concerns about a hawkish Fed and a strong dollar continue to exert downward pressure on the demand outlook for industrial metals.
