A Stronger Yuan Could Increase Commodity Metal Demand

TheStreet: 

China’s yuan reform suggests firmer prices for base metals , which have suffered price depreciation from expected weaker demand and excess inventory. Aluminum may recover some of the 20 percent price loss in the past three months due to production cuts, and gains are also expected in copper, while prices for nickel  and zinc  should trade sideways in the coming week.

China's move of making the Yuan more flexible will help the market react positively as hopes of an economic recovery have re-emerged. Therefore, a strong investor sentiment and higher risk appetite would support base metal prices this week.

Last week, base metal prices experienced losses as factory activity growth plunged, jobless claims increased and consumer prices in May registered their worst fall in almost one and a half years. Additionally, fresh selling by traders also dragged down the prices.

This week, metal prices would also be affected by the scheduled economic data releases. Existing home sales in May are foreseen to increase to 6.15 million from 5.77 million earlier, while new-home sales are seen declining to 410,000 from 504,000. Furthermore, U.S. initial jobless claims are seen falling by almost 12,000 in the upcoming week.

Posted via email from Jim Nichols