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Overnight, Beijing announced that the country’s PPI came in below expectations. The survey, which covers the cost of raw materials used in the manufacturing sector, dropped 2.7% in June compared with May. This comes after HSBC’s manufacturing PMI dropping to a nine-month low last week.
Dealers have therefore been selling the red metal, as China accounts for 40% of global copper purchases; if their manufacturing sector is slowing down, it could be seen as an indication that copper demand will be low in the future. Investors will therefore be keeping a keen eye on Chinese development going forward.
Tomorrow the US Federal Reserve will be making an announcement, and since copper is traded in US dollars a large move in the currency could impact the metal. As the most recent non-farm payrolls report came in above expectations, investors feel that next month the US could reveal a drop in unemployment. If this happens, and the Fed talks about the rising strength of the US economy, a resulting tightening of their monetary policy could boost the dollar and drive down copper.