Copper futures (/HG) sold off on Wednesday following the release of the Federal Reserve’s Summary of Economic Projections. While the Fed implemented a 25-basis point cut as expected, the updated Summary forecasts a Fed Funds rate at the end of 2025 of 3.75-4.0%, 50 basis points higher than the September Summary. The current active contract for March 2025 (/HGH25) fell from around $4.16 to below $4.09 in the aftermath. While copper outperformed equities on the day, giving up less than 2% versus the S&P 500’s 3% slide, the move represented a similar performance over the medium term, with copper sacrificing around a month of gains.

While equities are mostly affected by interest rates through corporate borrowing costs and the relative attractiveness of stocks versus cash or treasuries, the price of copper is more susceptible to perceptions of the economy and exchange rates. It was the last of these that drove the price of the red metal following the FOMC announcement. The Dollar Index ($DXY) rallied from 106.90 to 108.20 on the news, reaching the highest level since November 2022. More specific to copper, the exchange rate between the dollar and the Chilean peso rose to over 1000 briefly before coming down to 997 CLP/USD following the Fed announcement, which coincidentally came a day after the Central Bank of Chile issued an identical rate cut of a quarter-point (in this case to 5.0%) and similar inflation commentary. The dollar is up more nearly 14% for the year against the Chilean peso. Chile is the largest copper miner in the world and the source of over half of US imports. The dollar also gained ground against the currencies of Canada and Mexico, the second and third biggest sources for copper respectively.

While traders looked to interest rates and exchange in selling copper down, another item in the Summary could turn out bullish if it comes to fruition. The Committee raised the projection for GDP for 2025 from 2.0% to 2.1% while GDP for Q3 was revised upward to 3.1%.  Aside from the Fed, economic data this week was mixed for copper. Manufacturing PMI declined slightly over the past two weeks and Manufacturing Production increased less than expected. Retail Sales and Real Consumer Spending increased more than expected in November, but the Philadelphia Fed Manufacturing Index had an unexpected drop. Mixed data extended to housing, with Building Permits increasing to 1.50M topping expectations of 1.43M, while Housing Starts dropped to 1.29M versus expectations of a gain to 1.35M on an annualized basis. Next week will be light on news, with Durable Goods Orders coming Christmas Eve and Unemployment Claims on the day after Christmas.

Copper heated up along with the weather this spring before peaking in May. Since then, it has found lower highs while finding seeing support a few times a little over $4, providing a Descending Triangle setup. The 9-, 20-, and 50-day SMAs all crossed during a few tumultuous days in early November. The contract is trading below all three SMAs and a bearish cross of the 9-day below the 20-day appears likely. The RSI is close to the oversold level of 30 but has not reached it since July.

PCE Prices 8:30 AM ET

PCE Prices - Core 8:30 AM ET

Personal Income 8:30 AM ET

Personal Spending 8:30 AM ET

Univ. of Michigan Consumer Sentiment - Final 10:00 AM ET