Standard Bank: Weak dollar will limit declines

The Standard Bank issued the base metal daily report on July 14, saying that the base metal reacted differently to Bernanke's testimony, but this reaction was almost all short-lived. Standard Bank stated that although the possibility of QE3 has not been completely eliminated, it is not expected that this probability is particularly high. On the basis of probabilistic weighting, the view of standard banks on commodity positioning remains unchanged: the current industrial demand cycle tends to sell base metals on a rallies.

On the 14th, base metal was treading water to a large extent, and only zinc rose during the period. Given that the LME/SFE arbitrage window closes when the LME price is at $9,700/tonne, Standard Bank believes that the copper price will go down again. There have been reports that the workers’ strike in Chile’s Codelco has ended, and this news may accelerate copper prices.

In general, the weak US dollar on the 14th will limit the decline of any commodity, especially the base metal. The current firm focus of the market is on the concerns of the United States, especially the concerns raised by Moody's decision to place the US sovereign rating on the negative watch list. This, plus any expectation that the European Central Bank will raise interest rates further, will keep the dollar under pressure.

However, the risk remains, and any news or announcement regarding the eurozone debt crisis will see a fresh interest in the euro’s alternative, the dollar.

For data, Standard Bank focuses on US retail sales and commercial inventory data. Since December 2010, U.S. commercial inventories have been rising month-on-month. However, only the final demand will consume inventory, then the stocking of the stock again will be beneficial to the economy.