FX:Copper futures rally to fresh 4-month high after German court ruling
Forexpros - Copper futures rallied to a fresh four-month high during European morning hours on Wednesday, after Germany’s constitutional court approved the country’s participation in the euro zone’s permanent bailout fund, the European Stability Mechanism.
Investors were also focusing on the Federal Reserve’s two-day policy-setting meeting, which begins later Wednesday, for more clarity on the central bank’s monetary policy.
On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.720 a pound during European morning trade, gaining 0.6%.
Prices rose by as much as 0.75% earlier in the session to hit a daily high of USD3.724 a pound, which was the strongest level since May 8.
Germany's Federal Constitutional Court rejected pleas to block the ratification of Europe's EUR500 billion permanent rescue fund, clearing the way for Germany’s president to ratify the ESM under certain conditions and allowing the European Central Bank’s bond purchasing program to proceed.
However, the judges attached various conditions to the ESM, saying the country’s liability to the fund must not exceed EUR190 billion without the approval of the lower house of parliament and said that both houses of parliament must be kept informed about decisions relating to the ESM.
Meanwhile, markets continued to eye the outcome of the Fed’s policy meeting on Thursday, amid fresh speculation that the U.S. central bank may announce a third round of bond purchases, or quantitative easing, to boost growth.
Market expectations of a QE3 announcement this week increased after last Friday’s weaker-than-expected jobs report and following a speech from Fed Chief Ben Bernanke at Jackson Hole last month.
Past monetary stimulus rounds weakened the U.S. dollar, boosting the price of dollar-denominated commodities like copper.
The U.S. dollar took an additional hit after ratings agency Moody’s warned Tuesday that it could downgrade the U.S’s triple-A rating if budget negotiations for 2013 do not result in policy measures which will reduce the country’s debt.
Copper prices also drew support from bullish comments made by Chinese Premier Wen Jiabao on Tuesday.
Speaking at the World Economic Forum's meeting in Tianjin, Wen vowed his nation would meet its official target of 7.5% economic growth for 2012, saying policymakers in Beijing could utilize a CNY100 billion fiscal stability fund to boost growth if needed.
The remarks fuelled expectations policymakers in Beijing will roll out more stimulus measures to boost growth in the world's second largest economy.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Elsewhere on the Comex, gold for October delivery rose 0.6% to trade at a six-month high of USD1,743.35 a troy ounce, while silver for December delivery rallied 1.5% to trade at USD34.06 a troy ounce, the highest level since March 12.
