Copper dips over tapering tensions

Copper is off 0.5% this morning as a stronger US economy is stirring tapering fears.

This month the Federal Reserve begins reducing the size of its bond-buying scheme from $85 billion per month to $75 billion, and some traders feel this may make copper less attractive, as it has benefitted from a weak US dollar. The quantitative easing (QE) programme by the US central bank put pressure on the US dollar, which made copper more attractive to buy. However, traders are now relying on actual demand for the metal as a basis for their investment decisions.  

The recent manufacturing purchasing manager’s index (PMI) data from China came in below expectations, and it is just about clinging on to expansion territory. This is playing on dealers’ minds and raising questions about future demand.

On Friday, the US will release the non-farm payrolls report and the country’s unemployment rate. The Fed is using the unemployment level to measure its QE policy, and the previous two initial jobless claims reports have showed the number of people claiming unemployment benefit dropping. If US unemployment drops below 7% on Friday, we could see copper decline.

High Grade Copper chart

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