Federal Reserve officials' hawkish stance boosts the US dollar, while copper prices continue to fall.

Due to uncertainty about the possibility of an interest rate cut by the Federal Reserve in December, the prices of base metals are under pressure. Among them, the price of copper fell further from last week's record high, with all six major copper futures on the London Metal Exchange (LME) falling. As of the time of writing, LME three-month copper futures contract fell by 1.62% to $10,669.00 per ton. Copper is considered a barometer of the global economy, as it is widely used in construction, electricity, and manufacturing industries. Boosted by optimistic expectations of the results of trade talks between China and the US, LME copper futures reached a record high of $11,200 per ton last Wednesday. Uncertainty on the supply side has been a key driver of the recent rise in copper prices. Last week, mining giant Glencore (GLNCY.US) lowered its production expectations for 2025, while Anglo American (NGLOD.US) warned that production at a major mine in Chile would not meet standards. US mining giant Freeport-McMoRan temporarily suspended operations at the Indonesian Grasberg mine on September 8th after a landslide. The company has announced that it has invoked a force majeure clause and expects its production to be significantly impacted and continue until 2027. Freeport-McMoRan has lowered its production guidance for the 2026 Grasberg mine by 35%, meaning a reduction of about 270,000 tons of copper supply. It is worth mentioning that since 2025, several of the world's largest copper mines have been experiencing unrest. In late May, a seismic event at the Kamoa-Kakula copper mine in the Democratic Republic of Congo, the world's fourth-largest copper mine, led to a downgrade in its 2025 production guidance from 520,000-580,000 tons to 370,000-420,000 tons. At the end of July, the world's largest underground copper mine, Chile's El Teniente mine, experienced a mine collapse due to an earthquake. The state-owned mining company that operates the mine, Codelco, stated that production for this year will be reduced by 300,000 tons, about 11% lower than previously expected. However, Panmure Liberum senior analyst Tom Price believes that the main drivers behind the recent rise in copper prices - easing global trade tensions and heightened market expectations for a Fed rate cut - are already priced into current trading prices. He added: "Therefore, I think some investors may choose to exit in the short term due to the lack of new driving factors, while also coming back to the reality that the demand outlook for copper has not actually changed much." Currently, investor focus has shifted from supply crises to the Fed policy outlook. Several Fed officials recently made hawkish statements that boosted the strength of the dollar, making dollar-denominated commodities less attractive. Data shows that the Dollar Index (DXY) rose more than 1% in the past week, reaching 99.82 at the time of writing, its highest level since July. Fed Chairman Powell stated after last week's rate decision announcement that a rate cut in December "is by no means a foregone conclusion." Subsequently, several regional Fed presidents expressed caution towards excessive rate cuts. Kansas City Fed President Schneider released a statement opposing a 25-basis-point rate cut at last week's meeting. Dallas Fed President Kaplan stated that he was more inclined to keep rates unchanged last week, and that a rate cut in December would be challenging. Cleveland Fed President Mester believes that the current rate level is not far from her forecasted neutral rate, indicating that she sees limited room for further rate cuts. Chicago Fed President Evans also sent a hawkish signal on Monday. He stated that he has not yet decided whether to support a rate cut in December and that his threshold for a rate cut is "higher than the past two meetings." Evans acknowledged that the job market has cooled slightly, but still believes that most indicators show stable labor demand. He warned that cutting rates prematurely in the current environment of government shutdown, incomplete data, and uncertain inflation trends could lead to a "policy error of jumping the gun," and emphasized that "rates should come down with inflation, not ahead of it." However, some Fed officials support further rate cuts. San Francisco Fed President Daly stated on Monday that she supported the 25-basis-point rate cut implemented by the Fed last week, and believes that in a situation where inflation is still above the 2% target but the labor market is cooling, a slight further reduction in policy rates is appropriate. Fed Governor Brainard also stated that a rate cut is still possible at the December meeting, pointing out that current inflation risks and employment risks are "both on the rise." In her view, if rates remain too high, the labor market could deteriorate more rapidly. Market expectations currently suggest a probability of around 67% for a rate cut by the Fed in December. However, with missing economic data, unclear inflation trends, and differing speeds of labor market cooling, the policy outlook is becoming more uncertain.