Reuters reported that copper edged higher buttressed by returning confidence in the euro after the European Central Bank's chief reinforced a commitment to the single currency, while focus shifted to a key US economic indicator later in the session.
Three month copper on the London Metal Exchange traded at USD 7,502 per tonne by 0244 GMT up 0.43% and adding to small gains seen in the prior session.
Copper hit 1 month low of USD 7,344.25 per tonne on Wednesday and was on track to close the month of July down more than 2%. The most traded November copper contract on the Shanghai Futures Exchange rose 0.66% to CNY 54,550 per tonne.
Mr Jonathan Barratt CEO of BarrattBulletin said that "Draghi's comments were supportive, the market looking for more stimulus is supportive and the dollar is looking weak. If we get decisive steps by the ECB about how they are going to support the euro, we'll start to get a reversal in the money that flowed out and that, along with the recovery story will support base metals.ā€¯
Mr Mario Draghi president of ECB pledged to do whatever was necessary to protect the euro zone from collapse, sending a strong signal that inflated Spanish and Italian borrowing costs were in his sights. The euro steadied in early Asian trading on Friday after rallying on the comments, as investors prepared for US Q2 gross domestic product data later in the session.
A softer dollar makes commodities cheaper for holders of other currencies. Still, the open interest in the LME copper contract has dropped to its lowest level in nearly 5 years reflecting a profound lack of conviction about copper's near term price direction. The latest LME data showed open interest at 234,104 lots the smallest volume since August 2007.
On aluminium, RBC Capital said that price-induced shutdowns by aluminium producers such as Bosnia's Aluminij Mostar could erode a market surplus forecast for this year, potentially paving the way for a price recovery. The analyst community is still working on the numbers, but closures could be enough to seriously erode the previously expected surplus.
It said add that to the already tight physical market owing to load out queues at LME warehouses and you have a recipe for a decent short covering rally.
