Copper Hits 3-Year High

Daily Analysis - 17/10/2017

Strong Chinese Economic Data Boosts Industrial Metal

Copper prices rallied to a three year high on Monday, buoyed by solid economic data from top consumer China. Market sentiment was also lifted following comments from the country’s Central Bank Governor, who remarked that the Chinese economy is expected to grow around 7.00% during the second half of 2017, defying expectations of a slowdown.

Money Managers Turn Bullish on Copper

China's producer price inflation accelerated unexpectedly to a six-month high in September amidst a construction boom that displayed no signs of abating. The better than expected factory inflation figure was followed by data that showed China's copper imports jumped last month, fuelling demand optimism.

Customs data revealed that inbound shipments of unwrought copper imports soared by 26.50% in September from a year earlier. Further underlining the inherent market strength were figures from the US Commodity Futures Trading Commission, which showed that hedge fund managers last week increased their net long positions in the metal for the first time in five weeks. Copper futures for October delivery touched an intra-session high of $3.2430 a pound on Monday before pulling back in early Tuesday trade to around the $3.2000-zone.

Euro Area Trade Surplus Narrows

An import boom, fuelled by a stronger Euro, shrank the Area’s trade surplus according to official estimates published on Monday. Data compiled by Eurostat indicated that the goods trade surplus in the 19-country currency bloc fell to EUR 16.10 billion in August from EUR 23.20 billion in July and EUR 17.50 billion a year earlier.

The narrower surplus was primarily attributed to a surge in inbound shipments, which grew at a seasonally adjusted annualized pace of 8.60%. This rise easily outstripped the 6.80% growth in exports, shrinking the surplus. The August surplus figure was the smallest of 2017 excluding a temporary deficit in January. The surplus may face additional pressure if the stronger Euro impacts the Euro Area export economy in subsequent measuring periods. EURGBP was last seen around the 0.8870-mark after erasing all the prior session’s gains.

New Zealand Inflation Picks Up Momentum

Rising housing costs and higher food prices saw consumer prices in New Zealand gather pace in the third quarter, according to data released by Statistics New Zealand. The consumer price index advanced 0.50% and by 1.90% on an annualized basis compared to forecasts of 0.40% for the three months ended in September and 1.80% on an annualized basis.

While the results marked a pickup in prices compared to the flat CPI reading reported during the second quarter, the latest figures still leave inflation below the midpoint of the Reserve Bank of New Zealand's 1.00%-3.00% target range. The Central Bank stated in August that it expects price growth to decelerate during the fourth quarter, which combined with tepid economic growth projections, suggests no monetary policy changes are imminent. NZDUSD has reversed from the highs of Tuesday trading to currently hover around 0.7170.

International Transactions in Canadian Securities Slow

Foreign investor interest in Canadian securities waned in August, with purchases concentrated mainly in the bond market. Figures from Statistics Canada unveiled late on Monday showed that overseas investors acquired CAD$ 9.85 billion ($7.85 billion) in Canadian securities, compared to an upwardly revised CAD$ 23.97 billion in July.

The August purchases were well-below the monthly average of CAD$ 17.71 billion recorded over the seven months to July per calculations conducted by the statistics agency. Acquisitions were driven by the purchase of CAD$ 8.15 billion in Canadian federal and provincial government bonds on the secondary market. At the same time, domestic investors added to their holdings of international securities by CAD$ 12.04 billion amidst increased interest in US corporate instruments. USDCAD is gaining in early European trade, with the pair was last seen just below the key resistance at 1.2550.