A slight rise in copper prices and anticipation of central banks’ interest rate decisions

Copper prices rose slightly during trading on Monday, supported by improved demand expectations after the decline in bets on raising US interest rates, which overshadowed the pressures resulting from the strength of the dollar.

The three-month standard copper price on the London Metal Exchange rose by 0.19 percent to $14,286 per metric ton by 03:00 GMT, according to Reuters.

Investors are evaluating the decline in the possibility of the US Federal Reserve raising interest rates during its scheduled meeting this month, after US jobs data last week came in weaker than expected, which eased expectations of continuing to tighten monetary policy to confront inflationary pressures.

According to the CME Group's Fed Watch tool, traders are now pricing in only an 18 percent probability of a rate hike at the October meeting, compared to 64 percent a week ago.

High interest rates typically slow economic activity and reduce demand for industrial metals associated with economic growth, such as copper.

On the other hand, the US dollar rose to a level approaching its highest levels in 17 months, supported by the weakness of the euro, while the dollar index, which measures the performance of the US currency against a basket of six major currencies, rose by 0.53 percent.

The strength of the dollar constitutes a pressure on primary commodities denominated in the US currency, as it makes them more expensive for buyers who hold other currencies.

Copper also benefited from the decline in oil prices, as high energy costs during the recent period contributed to enhancing inflationary pressures and negatively affecting metal prices. The decline in oil was driven by an increase in crude exports from the Middle East and the G7 countries releasing part of their oil reserves, which boosted supplies in the markets.

In the other metals market, aluminum fell by 0.19 percent to its lowest level in more than three months at $3,091.5 per ton, continuing its losses for the sixth session in a row.

Aluminum has lost more than 18 percent of its value since reaching its highest level in four years in June, with concerns about supplies receding and expectations increasing for the addition of new production capacities in Indonesia.

As for the rest of the metals traded on the London Stock Exchange, zinc decreased by 0.44 percent, while lead rose by 0.3 percent, nickel declined marginally by 0.01 percent, while tin rose by 0.24 percent.

The Shanghai Futures Exchange was closed due to the National Day holiday in China, and trading will resume on October 8.

The Qatar Central Bank and Euroclear Group announced on Monday that Qatar will establish a clearing and settlement link with the group for its local government bonds, in a move aimed at expanding the international investor base and enhancing liquidity in the local debt market.

The two parties said in a joint statement that the initiative is expected to improve market efficiency and enhance international capital flows to Qatar, at a time when global investors are increasingly interested in debt instruments issued by emerging markets and denominated in local currencies.

Under the new link, international investors will be able to purchase, hold and settle government bonds and Qatari sukuk denominated in Qatari riyals, which meet the conditions, through Euroclear’s international settlement system.

Euroclear, headquartered in Belgium, is a financial market infrastructure group that provides securities settlement and custody services, allowing banks and investors to hold, transfer and settle financial assets.

Under the new structure, Euroclear will provide international settlement services, while Edaa, the central custodian for securities in Qatar, will continue to provide its services to local investors. The Qatar Central Bank will remain responsible for issuing securities and making payments to investors.

Sheikh Ahmed bin Khalid bin Ahmed Al Thani, Deputy Governor of the Qatar Central Bank, said that cooperation with Euroclear represents “a practical step towards expanding international access to Qatari government debt instruments,” and enhancing the presence of the Qatari market and its visibility among global investors.

Investors are increasingly betting that the Indian central bank will raise interest rates this week, with inflation rising and strong growth continuing, at a time when major central banks are moving to tighten monetary policy.

A Reuters poll showed that 35 out of 61 economists, or about 60 percent, expect to raise the interest rate by 25 basis points during the Monetary Policy Committee meeting on Wednesday. Swaps markets show a stronger bet, fully pricing in an increase in borrowing costs.

The raise, if achieved, will be the first for the Indian central bank in about four years, raising the repurchase rate from 5.25 percent, the level at which it has stabilized for about 10 months. The bank had reduced interest rates by a cumulative amount of 125 basis points during 2025, from 6.5 to 5.25 percent.

Rahul Bajoria, an economist for India and the Association of Southeast Asian Nations at Bank of America Global Research, said that the central bank “now has few reasons to wait,” as growth prospects become clearer, inflation pressures expand, and the need to wait for more clarity at the global level declines.

Bajoria expects the central bank to begin a monetary tightening cycle that may reach 100 basis points, starting in October.

The calm inflation reading at the beginning of the year gave the central bank room to monitor, even with the rise in oil prices after the war with Iran, but price pressures later expanded beyond food and fuel.

Consumer price inflation in India rose to 4.82 percent in August, exceeding the central bank's target of 4 percent for the third month in a row, while the prices of about half of the components of the CPI basket rose at rates at or above the target.

In contrast, the Indian economy grew by 7.8 percent during the second quarter of the year, which enhances the central bank’s ability to move towards tightening monetary policy without facing an immediate risk to growth.

Markets are watching the central bank's decision

Analysts believe that keeping interest rates unchanged may face pressure in the markets, especially the currency and bond markets.

Vivek Rajpal, macroeconomic strategist for Asia at GB Drax Honoré, said that maintaining rates “will not be viewed positively in the currency market,” and may also put pressure on long-term bonds, adding that the central bank will need to indicate its willingness to raise rates again if necessary.

The Indian rupee remains under pressure, about 1 percent below its record low in May.

High interest rates may make Indian bonds more attractive to foreign investors, at a time when local stocks are facing difficulties in the absence of clear opportunities related to artificial intelligence.

Institutions have varying estimates of the size of the potential tightening cycle; Economists at Nomura and Barclays expect a limited cycle of between 25 and 50 basis points, while Bank of America and ANZ expect increases ranging between 75 and 100 basis points.

Swaps markets are currently pricing in about 100 basis points of increases over the next 12 months, and about 140 basis points over 24 months.

Bajoria believes that the central bank may not want to commit to a long tightening cycle during the October meeting, but it may be more prepared for that in December.

Hence, attention will be focused on any adjustments in the central bank’s expectations for inflation and growth, in addition to its position on “neutral” monetary policy, in search of indications of the extent to which it may go in the interest-raising cycle.