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Copper prices set for the biggest weekly rise since July last year

January 8, 2021by Nicholas Kabaso0
  • Terms of trade for copper producing countries have improved considerably and that was evident in Chile’s Dec trade surplus which benefitted greatly from the surge in copper export proceeds. This week alone, copper prices were set for the biggest weekly rise since July last year, with hopes of more stimulus from the US amongst the main drivers of this improved sentiment.  The 3m copper future was up to $8,229 a tonne yesterday which was up around 6% for the week.
  • Looking at stock markets around the globe and the manner in which they are scaling fresh record levels, it is clear that investors are now starting to look beyond the current bout of coronavirus cases and are focused instead on the global economic recovery that will follow. Although other base metal prices fell on the trading session yesterday, they still retain a bullish bias that will likely resume next week, especially if yesterday’s USD appreciation is not sustained.
  • In the US, as the ADP data showed on Wed, the weekly jobless claims figures also showed that the labour market recovery appears to be faltering, as weekly claims fell by only 3,000 to 787K. Continuing claims however fell a further 126k to 5.072mn implying that rehiring is still continuing with some momentum. Nonetheless, it was hoped that by now, initial claims would be substantially lower than they are at the moment. Ahead of the latest non-farm payrolls today, this week’s data has prepared investors for a downbeat result. It is also clear that the US economy will still take many months before in normalises.
  • Following the chaos that unfolded in the US Capitol, calls for Trump’s removal have been louder than ever. Pence looks reluctant to invoke article 25 which means impeachment might follow if there is enough time. Any impeachment if successful would prevent Trump from running for re-election and a second term in office. Time may be too short. Article 25 would be the easier approach, but VP Pence appears reluctant to do so, partly as it may affect his political prospects in the future. That being said, Pence has reportedly already angered Trump who has increas-ingly isolated himself in the White House.
  • In related news, Trump appears to have finally conceded that a transition to a new administration will take place on the 20th Jan. However, Trump will likely face a string of legal problems once he leaves office. Beyond just the probable court case around hush-money paid to two women Trump had affairs with for which he cannot be pardoned, to tax evasion and defamation. He is also looking at potentially starting a media company of his own and the establishment of a fund that would allow him to continue campaigning ahead of 2024.
  • Shifting to the FX markets, the USD has recovered marginally, with some sensibility returning to US politics and Trump seemingly conceding that a transition of power will take place on the 20th Jan. The recovery has come off a low base and it remains too soon to tell whether the gains are simply a market recovery within a broader weakening trend, or whether this was the start of something more substantial. Looking at all the evidence available, one would more than likely conclude that it was the former. There appears to be no obvious reason for why the USD should begin any recovery, other than a market that may be a little one-sided in its speculation against it. Looking to next week, the Kwacha is expected to be range bound against the USD as market movements continue to be dictated by demand and supply. 

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Nicholas Kabaso

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