Copper prices have recorded three consecutive days of increases, primarily driven by market expectations for supportive economic signals from the Chinese government.

However, actual results will still require more concrete evidence. The fundamental information surrounding these expectations is now relatively saturated, so copper prices are likely to await macroeconomic factors, with a focus on the minutes of the Federal Open Market Committee (FOMC) meeting from late January, to be released tonight.

In light of inflation cooling more slowly than anticipated, recent Federal Reserve officials have shown a tougher stance on keeping interest rates high for a longer period before moving towards easing. The latest Reuters survey also indicates that most economists believe interest rates may begin to ease in June. This makes the "soft landing" scenario more precarious and is negative news for copper prices, which are considered a gauge of economic health.

Analysts report increasing demand from hedge funds in the U.S. options market for "receiver swaps," or options on interest rate swaps, a type of trade that profits when rates decline. In other words, buyers enter into an interest rate swap contract where they receive a fixed rate and pay a floating rate. This often reflects concerns about the U.S. economic outlook.

Overall, while the soft landing scenario remains widely supported, the hard landing scenario has been gaining traction recently. Therefore, the medium-term trend for copper prices will likely face challenges in making strong breakthroughs from a macroeconomic perspective.

Source: MXV