Copper prices fell on Thursday as the dollar gained modest ground against most major rivals, pressuring dollar-denominated industrial metals. 

Copper May futures rose 2.1% back on Monday at the Shanghai Exchange to a record 75.17 thousand yuan per tonne.

Back then, the dollar was weakened and investors still had hopes that the Federal Reserve will cut interest rates in June. 

However, strong US employment and inflation data dashed such hopes, with investors dismissing the possibility of a Fed rate cut in June or even in July. 

US consumer prices rose 3.5% y/y in March, above estimates of 3.4%.

On a monthly basis, consumer prices rose 0.4%, while analysts expected a rise of 0.3%. 

Analysts noted that copper demand from AI and data center companies alone could reach a million tonnes by 2030 and will lead to an increased deficit. 

A change towards relying on EV cars and renewables is expected to increase copper consumption in the next few years as the world moves towards controlling carbon emissions. 

The Trafigura Company’s analysts estimate copper deficits to range between 4 and 5 million tonnes by 2030.

Otherwise, the dollar index rose 0.1% as of 15:58 GMT to 105.3, with a session-high at 105.5, and a low at 105.03. 

Copper futures due in May fell 0.8% as of 15:53 GMT to $4.24 a pound. 

Oil prices fell in European trade on Thursday, resuming its losses after a short hiatus yesterday following a spike in US crude stocks.

Prices are also pressured by the dollar's steep rise against major rivals, making dollar-denominated commodities costlier to holders of other currencies. 

Markets are closely monitoring the mounting tensions between Iran and Israel which threatens to develop into a wide-scale war in the Middle East, threatening crude supplies. 

 Prices

US crude fell 0.9% to $85.53 a barrel, with a session-high at $86.60.

Brent declined 0.75% today to $89.85 a barrel, with a session-high at $90.89. 

US crude rose 1.1% while Brent added 1.2%, the first profit in four days. 

US Stocks 

The Energy Information Administration reported a sharp increase of 5.8 million barrels in US crude stocks in the week ending April 5, the third such weekly increase in a row, beating estimates of a 0.9 million buildup.

According to the EIA, total commercial stocks rose to 457.5 million barrels, the highest since July 2023, in a negative sign for demand in the US. 

US Production

US crude production stayed flat last week at 13.1 million barrels, the lowest since the week ending December 8. 

The Dollar 

The dollar index rose 0.2% on Thursday, extending gains for a second session and scaling a five-month high at 105.37 against a basket of major rivals. 

The data hurt market estimations about multiple Federal Reserve interest rate cuts this year. 

Iran-Israel Tensions 

The Israeli government warned that if Iran attacked Israel, the Israeli army would respond with an attack on Iranian territory. 

Iran’s supreme leader Khamenei threatened to punish Israel, after accusing it of striking the Iranian consulate in Syria last week, killing 7 military officials. 

The mounting Israel-Iran tensions threaten a potential widening of the war between the two sides in the region, which could threaten supplies. 

Oil Prices Outlook 

Goldman Sachs’ analysts expect Brent to remain below $100 a barrel, provided no new surprising geopolitical hits take place. 

The European Central Bank voted to hold interest rates unchanged at 4.50%, already the highest since 2001, as expected by most analysts. 

The dollar rose in European trade on Thursday against a basket of major rivals, extending gains for the second straight session and scaling a five-month high as US treasury yields rally. 

Scorching US inflation data reduced the odds of a Fed interest rate cut in June, and hurt the expectations of rate cuts overall this year.

Now investors await important US producer prices and unemployment claims data later today to have a better picture of the economy.

The Index 

The dollar index rose 0.15% to 105.32, the highest since November 2023, with a session-low at 105.12, after closing up 1.05% on Wednesday, the largest profit since March 2023. 

US Yields

US 10-year treasury yields rose 0.45% on Thursday on track for the second profit in a row, scaling a five-month high at 4.568%. 

The gains came after the excellent US inflation data which showcased the continued inflationary pressures on the Federal Reserve.  

US Inflation

US consumer prices rose 3.5% y/y in March, the fastest pace since September 2023, and above estimates of 3.4%. 

Core prices rallied 3.8% in March, above estimates of 3.7%. 

US Rates

Following the data, the odds of a 0.25% interest rate cut by the Fed in June tumbled from 56% to just 16%, while the odds of such a cut in July fell from 80% to 43%. 

Now traders barely expect two interest rate cuts from the Federal Reserve this year totaling 50 basis points, down from 75 basis points before. 

The UBS bank now expects the Fed to start cutting rates in September. 

Important Data

Now investors await a batch of important data today to gather more clues on the future path of interest rates, including producer prices and unemployment claims data.