Steel price rebounds on covid updates, comments from Fitch on China

Steel price pauses recent downside around one-week low, mildly bid of late.
Fitch expects no further deterioration in China’s steel profitability.
China’s Chengdu and Dalian lift covid-led lockdowns, PBOC cuts 14-day reverse repo rate.

Anil Panchal FXStreet

Steel price rebound from nearly eight-day low on cautious optimism surrounding China. Also favoring the metal buyers could be the absence of Japan and the UK which allows the quote to brace for this week’s key monetary policy meetings. Furthermore, the People’s Bank of China’s (PBOC) latest action also helps the industrial metal prices to remain firmer.

That said, prices of the most active steel rebar contract on the Shanghai Futures Exchange (SFE) prints nearly 0.50% intraday gains around 3,711 offshore Chinese yuan by the press time of Monday’s Asian session.

That said, the Chinese central bank lowers the 14-day reverse repo rate by 10 basis points (bps) to 2.15%. “With no reverse repos maturing on Monday, China central bank injects 12 billion yuan on the day,” per Reuters.

On the other hand, global rating agency Fitch said, “Do not expect further deterioration in China's steel sector profitability following production cuts in response to weak demand,” per Reuters. Fitch also mentioned, “We expect production to recover from September as construction enters peak season.” It should, however, be noted that Fitch does not expect a strong recovery in steel demand, which in turn could keep grinding the metal prices lower.

Elsewhere, US President Biden said, “I'm more optimistic than I have been in a long time.” The national leader also stated that they are going to get control of inflation. On the same line are the covid updates from China as it unlocks Dalian and Chengdu cities while witnessing zero coronavirus cases in Beijing and one, versus zero the previous day, outside Shanghai’s quarantine zone.

However, US President Biden’s readiness to back Taiwan in case China attacks Taipei and the hawkish hopes for the Fed seem to weigh on the steel price ahead of the key monetary policy announcements.

It’s worth noting that a daily off in the UK and Japan join a light calendar to restrict the market moves on Monday, which in turn challenges the metal’s corrective bounce.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.