Copper prices fell on Monday as the dollar edged up against major rivals and amid expectations for weaker demand and higher supplies from China.

Copper three-month futures at the London Metals Exchange fell 0.7% to $8,511.50 a tone.

Copper September futures at the Shanghai futures exchange fell 0.5% to 68930 yuan a tone.

Investors await major inflation data from the US and China later this week to gather more clues on the state of economic performance in both countries.

Traders were cautious about metals demand in China as recent stimulus measures failed so far to prop up growth.

In China, imports fell in recent months and supplies ran out, in turn raising spot copper prices to a month high at 285 yuan per tone.

However supplies are expected to increase in August as many factories resume their operations after summer break.

In fact, The Shanghai metals market expects refined copper to reach a record high production in August at 986100 tones.

At the London Metals Exchange, aluminium fell 0.4% to $2224.5 a tone, while zinc fell 0.7% to $2485 , as nickel fell 0.4% to $21,220, while lead added 0.2% to $2132, and finally tin rose 1% to $27,985.

Otherwise, the dollar index rose 0.1% as of 16:24 GMT to 102.07, with a session-high at 102.3, and a low at 101.9.

Copper September futures fell 0.9% as of 16:21 GMT to $3.83 a pound.

International benchmark Brent fell in European trade for the first time in three days, giving up four-month highs scaled in Asian trade on profit-taking.

Brent marked the sixth weekly profit in a row last week, the longest such streak of weekly gains since late 2021 amid expectations for extreme shortages.

Brent Price Today

Brent fell 1.1% to $85.26 a barrel away from April highs at $86.66, after rising 0.9% on Friday, the second profit in row.

Dollar

The dollar index rose 0.4% on Monday, resuming gains after a two-day hiatus and almost touching a four-week high at 102.84 against a basket of major rivals.

A stronger dollar pressures commodities and minerals and makes them costlier to holders of other currencies.

Such gains come after a string of bullish remarks by Fed officials, which bolstered the case for an additional US interest rate hike this year.

Weekly Trading

Brent rose 1.9% last week, the sixth weekly profit in a row and the longest winning streak since December 2021.

Citibank said that markets are getting much tighter as the impact of the Russian and Saudi production cuts become apparent while summer demand on gasoline increases.

Saudi and Russian Cuts 

Officials at the Saudi energy ministry said the kingdom will extend its voluntary production cuts estimated at a million bpd for September.

Additionally, Russian Vice Prime Minister, Alexander Novak, said Russia is seeking to raise global oil prices in cooperation with Saudi Arabia, and will cut exports by 300 thousand bpd in September.

Dollar rose in European trade against a basket of major rivals on Monday, resuming gains and almost touching a four-week high following bullish remarks by Fed officials.

Now traders await important US inflation data later this week for July, which will provide important clues on the future path of interest rates.

The Index

The dollar index rose 0.4% to 102.38, with a session-low at 101.97, after falling 0.5% on Friday, the second loss in a row away from a four-week high at 102.84. 

The dollar declined on profit-taking after weak US jobs data last month, which reduced inflationary pressures on the Federal Reserve.

The US economy added 187 thousand new jobs in July, below estimates of 205 thousand new jobs. 

Fed Remarks

Federal Reserve member Michelle Bowman said there might be a need for yet another interest rate hike if inflation remained stubborn.

Bowman added that when thinking about more interest rate hikes, it'll will depend on how inflation is steadily declining, as consumer prices remain higher than targets.

US Rates

Pricing for a 0.25% Fed rate hike at the September 20 meeting currently stands at 14%.

Inflation Data

Investors await more important US inflation data for July to better price in the odds for the next policy decision by the Federal Reserve.

The recent tumble by the EUR/USD pair away from the $1.12 highs wasn't surprising to analysts at the Commerzbank, who expect more soft trading by the pair in the short term.

However, the German bank remains committed to its long-term outlook, which portrays a strong recovery by the end of the year and early 2024. 

In the latest research paper by the German bank, it said that euro's decline below $1.1 was nudged on by the current fundamental scene, with the pair potentially heading for more losses due to the ECB's direction.

The ECB

At the July 27 meeting, the European Central Bank raised  interest rates by 25 basis points, the ninth increase in a row to 4.25%, the highest since October 2008.

The ECB noted that euro zone inflation continues to decline, but will remain unsuitably high for an extended period if time. 

ECB President Christine Lagarde said the ECB could raise interest rates or avoid so at the September meeting according to the data.

She added that euro zone data will determine the path ahead for policies.

Weak Factors

Commerzbank's analysts believe the factors behind EURUSD drop above $1.12 last month were weak.

They expect strong US data and weaker euro zone data to raise chances of another US interest rate hike, which in turn makes the dollar more appealing to investors. 

However, the analysts noted there's only limited chances for the interest rate factors to play a role in, as both the Fed and the ECB approach neutrality with their interest rates.

Indeed, Commerzbank's economists believe the period of weak economic performance in the euro zone will end soon by early 2024, in turn weakening chances of an ECB interest rate cut. 

Overall, the German bank considers the "risks" impacting euro to be "low" for the time being.

Conversely, they expect the US to undergo a significant slowdown from now on, which could force the Federal Reserve to cut interest rates. 

Long-Term Forecasts

In the long term, Commerzbank expects the ECB to be on the bullish side compared to its US counterpart, in turn strengthening euro's standing against dollar.

In fact, the back expects the EUR/USD pair to approach 1.14 by the end of the year, then 1.15 by the end of the first quarter in 2024.