Zinc prices fell 1% to close at 366.2, as growing concerns about weakening demand in China weighed on sentiment across the metals market.

Recent economic data from China showed retail sales declined 0.6% in May, marking their first contraction in more than three years, while fixed-asset investment dropped 4.1% during the first five months of the year, significantly worse than market expectations.

The figures raised concerns about the strength of industrial activity and construction demand in China, the world's largest consumer of metals.

However, Chinese industrial production rose 4.5% year-over-year in May, beating forecasts and providing some support to the broader metals complex.

Supply disruptions limit zinc losses

Despite mounting demand concerns, zinc's decline remained limited due to tightening global supply conditions.

Nexa Resources announced a temporary suspension of operations at its Cajamarquilla smelter in Peru after a fire damaged processing infrastructure.

Meanwhile, Kazzinc, owned by Glencore Group, continued operating at reduced capacity following an explosion that affected its zinc and lead production facilities in Kazakhstan.

These developments came as the International Lead and Zinc Study Group had already projected a refined zinc market deficit for the current year.

Prices also received support from declining global inventories and ongoing challenges facing mine production.

Production growth expectations cap upside

On the other hand, expectations for higher output from several major producers continued to limit zinc's upside potential.

Sweden's Boliden plans to restart production at the Garpenberg mine during the second quarter, while Japan's Mitsui Mining & Smelting expects refined zinc production to increase by 3.2% during the first half of fiscal year 2026-2027.

Global zinc market data also showed that the supply surplus narrowed significantly in March, indicating an improving balance between supply and demand compared with previous periods.

The Price

From a technical perspective, the market is witnessing long liquidation activity, with open interest declining 7.16% alongside lower prices.

Zinc faces initial support at 364.0, followed by a second support level at 361.9.

On the upside, resistance stands at 369.4, and a break above that level could pave the way for further gains toward 372.7.

Bitcoin slipped toward the $65,000 level ahead of the US Federal Reserve's monetary policy decision, as traders reduced risk exposure and reassessed interest rate expectations under new Fed Chair Kevin Warsh.

According to market data, Bitcoin fell from a June 16 high near $67,200 to an intraday low around $65,236 on June 17 before stabilizing near $65,300.

The pullback comes as investors await the outcome of the Fed's two-day policy meeting, with markets widely expecting the central bank to leave interest rates unchanged within the 3.50%–3.75% range.

Focus shifts to rate projections and the new Fed chair's message

While markets are not expecting any change in interest rates, attention is centered on the updated dot plot showing policymakers' rate projections, as well as Kevin Warsh's first post-meeting press conference.

Investors are trying to determine whether policymakers will move away from any previous easing bias and reinforce expectations that borrowing costs will remain elevated for longer, with inflation still running above 4%.

Caution extended to other markets as well. Gold and silver edged lower during the session, while oil prices fell toward $75 per barrel for a fifth consecutive session as markets priced in the possibility of Iranian oil exports returning under a proposed US-Iran agreement.

Meanwhile, Asian technology stocks continued to attract investment flows, with Japan's Nikkei 225 reaching fresh record highs above 70,000 points, supported by ongoing enthusiasm surrounding artificial intelligence-related investments.

Technical resistance caps Bitcoin's recovery

From a technical perspective, Bitcoin's recent rebound from levels below $60,000 appears to have lost momentum near a key resistance zone.

On the daily chart, the cryptocurrency returned to the $65,200–$65,800 range, an area that acted as major support during February and March before turning into resistance following the sharp selloff earlier this month.

Although Bitcoin briefly managed to reclaim this zone, it quickly fell back below it, suggesting that selling pressure remains in place.

The price is currently trapped between major support near $60,000 and strong resistance around $68,000, reflecting the cautious and wait-and-see approach dominating trading activity ahead of the Federal Reserve's decision and updated economic projections.

Oil prices held near their lowest levels in three months on Wednesday as investors weighed the impact of the US-Iran peace agreement against warnings from the International Energy Agency of a significant supply surplus next year, while signs of near-term demand improvement emerged from efforts to rebuild depleted inventories.

Brent crude futures rose 30 cents, or 0.4%, to $79.26 per barrel, while US West Texas Intermediate crude gained 24 cents, or 0.3%, to $76.29 per barrel.

Both benchmarks had earlier touched their lowest levels since early March after falling about 5% on Tuesday amid hopes that the US-Iran agreement would help restore oil flows from the Gulf region.

Tamas Varga, an analyst at PVM Oil Associates, said the market’s base-case scenario now assumes the reopening of the Strait of Hormuz and the resumption of shipping traffic through the strategic waterway in both directions.

He added that even a gradual recovery in oil flows would have a meaningful impact on the global oil market balance.

IEA forecasts a major oil surplus in 2027

In its first long-term outlook for 2027, the International Energy Agency said the global oil market is heading toward a substantial supply surplus, with worldwide production expected to increase by about 8 million barrels per day, while demand is projected to rise by only around 2 million barrels per day.

In the near term, the agency noted that the US-Iran agreement could provide an opportunity for countries and companies to replenish depleted inventories or build new strategic reserves.

Crispus Nyaga, research analyst at Empire FX, said markets may not yet be fully pricing in the scale of the expected supply surplus that could enter the market over the coming period.

More details of the temporary agreement emerged on Tuesday after a US official confirmed that Iran would be allowed to resume oil exports immediately upon signing the deal.

The memorandum of understanding, which has not yet been officially published, extends the fragile ceasefire reached in April by an additional 60 days to allow negotiations aimed at securing a permanent settlement.

Despite that, energy industry officials continue to warn that a full return to pre-war production and refining levels could take weeks, months, or even years.

Uncertainty also increased after Israel distanced itself from both the April ceasefire agreement and the latest US-Iran deal, raising questions about the long-term durability of the arrangement.

Against this backdrop, Goldman Sachs lowered its forecast for Brent crude in the fourth quarter of 2026 to $80 per barrel from a previous estimate of $90, citing reduced upside risks to energy prices following the agreement.

Meanwhile, data from the American Petroleum Institute showed US crude oil inventories fell by 8.3 million barrels in the week ended June 12.

The drawdown was significantly larger than analysts’ expectations for a decline of 4.6 million barrels, while markets await official inventory figures from the US Energy Information Administration later today.

The US dollar traded mostly steady against major currencies on Wednesday as investors awaited the first monetary policy decision from the Federal Reserve under its new Chair, Kevin Warsh. Markets are bracing for potential volatility as traders assess his policy approach and communication style.

The euro held steady at $1.1605, while the British pound edged lower to $1.3420 and slipped to 86.5 pence against the euro after UK inflation data came in below expectations, potentially giving the Bank of England more room to delay any interest rate increases this year.

Despite those developments, the Federal Reserve meeting remains the dominant market event, prompting investors to avoid taking large positions ahead of the decision.

The Fed is widely expected to leave interest rates unchanged at its first meeting under Warsh. However, markets will closely monitor the policy statement, economic projections, and press conference for any signs that the central bank may be stepping back from a more accommodative stance amid growing inflation concerns.

Jane Foley, Head of FX Strategy at Rabobank, said:

"We have seen several central bank meetings this month, but this one overshadows them all."

She added:

"There is considerable uncertainty about the message Warsh may deliver. Nobody expects a rate change, but the question is whether he will downplay the importance of the dot plot, introduce a new policy framework, or guide markets toward a more dovish outlook."

The so-called "dot plot" reflects policymakers’ expectations for the future path of interest rates.

President Donald Trump appointed Warsh to lead the Federal Reserve after repeatedly criticizing former Fed Chair Jerome Powell for moving too slowly in cutting interest rates.

At present, money markets are pricing in roughly an 80% probability that the Federal Reserve will raise interest rates at some point this year.

Before the United States and Iran reached a temporary agreement to end the conflict in the Middle East, many economists expected the Fed to signal a willingness to tighten policy further in order to prevent higher energy prices from feeding through into broader inflation.

However, with oil prices now trading below $80 per barrel, the central bank may deliver a different message at this meeting.

Attention also turns to the Bank of England and Bank of Japan

The Bank of England is scheduled to announce its policy decision on Thursday and is also expected to leave interest rates unchanged, with investors focusing more on policymakers’ guidance than the decision itself.

That guidance could be influenced by Wednesday’s inflation data, which showed UK inflation holding steady at 2.8% in May, unchanged from April’s 13-month low.

Foley said continued easing in inflation pressures could allow the Bank of England to avoid raising interest rates this year if peak inflation proves lower than previously expected.

Markets are currently pricing in just one UK rate hike before the end of the year.

Meanwhile, the Japanese yen traded at 160.25 per dollar, posting a modest gain but remaining close to levels that have historically triggered concerns about official intervention to support the currency.

The Bank of Japan raised interest rates on Tuesday to their highest level in 31 years, marking another major step in its policy normalization process. The central bank also signaled that further tightening remains possible if inflation pressures linked to higher energy prices persist.

However, policymakers stopped short of providing any clear indication regarding the timing of the next rate increase.

In Europe, the Swedish krona weakened against both the dollar and the euro after the Riksbank left interest rates unchanged.

The central bank said the conflict in the Middle East has increased inflation risks and raised the possibility of future rate hikes, while also noting that core inflation remains subdued and economic activity continues to be weaker than normal.

The euro rose 0.15% to 10.88 Swedish kronor, while the dollar gained 0.19% to 9.383 kronor.