Copper Rebound Gains Pace After the PBoC Lowered Chinese Borrowing Costs

Copper News and Analysis

• China lowers short-term lending rates to support economic recovery
• Industrial metals like copper benefitted from a lift in sentiment as prices rose
• FOMC remains the most impactful item on the economic calendar this week
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

China Lowers Short-Term Lending Rates to Support Recovery

The People’s Bank of China (PBoC) lowered the 7-day reverse repo rate to 1.9% which previously stood at 2% in its latest attempt to support the economy’s recovery. Given this show of support, it wouldn’t be too far of a stretch to see the One-Year Medium-Term Lending Facility (MLF) and the Loan Prime Rate (LPR) edge lower too.

Signs of waning demand for industrial metals from China, has led to the overall decline in copper prices for the majority of 2023. The timing of China’s reopening, after an extended period of targeted lockdowns to curb the spread of Covid, happened at an unfortunate time as major economies entered a period of below trend growth as interest rates remain relatively high.

Copper Daily Chart

Source: IG, prepared by Richard Snow

FOMC to Decide on a Rate Hold and Updates Economic Projections

Tomorrow, we find out of the Fed has decided to keep rates on hold, with a view to hike in July. This remains the consensus view as markets price in a 94% chance of a rate skip tomorrow – up from around 80% witnessed before the lower CPI number was released this morning. The Fed has the unenviable task of avoiding another rate hike but expressing a hawkish view to keep markets from pricing in more rate cuts. Nevertheless, a ‘skip’ on rate hikes favors the commodity, much like it would gold. A slightly weaker dollar may also add to the copper retracement.

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX