Copper futures climbed toward $6.2 per pound on Friday, putting them on track for a weekly gain. This upward movement is largely attributed to traders scaling back their expectations for Federal Reserve interest rate hikes, following the release of softer-than-expected US employment data. The US economy added significantly fewer jobs in June than forecasts predicted.
Market reactions to the employment data show that the probability of a Fed rate increase in September has dropped from approximately 67% to about 50%. This shift in monetary policy expectations is a key factor influencing the current strength in copper and other industrial metals, as it suggests a more favorable environment for demand.
Industrial metals had previously faced downward pressure due to signals from Federal Reserve officials indicating a greater willingness to tighten monetary policy. Such a hawkish stance tends to strengthen the US dollar and weigh on the demand outlook for raw materials. The current trend suggests a reversal of this sentiment.
Further supporting the rise in copper prices is the easing of supply risks. Improved commercial traffic through the crucial Strait of Hormuz has contributed to a more stable supply outlook, alleviating some of the concerns that had previously dampened prices.
In contrast, earlier in the week, on June 29, copper prices had slipped as traders focused on the Federal Reserve's hawkish stance and a strengthening US dollar. Three-month futures dropped toward $13,300 a ton in London, experiencing two consecutive weekly declines, highlighting the sensitivity of copper prices to monetary policy signals and currency movements.
