Summary
- PCE surprise delays cut bets.
- Base metals declined today, led by heightened copper volatility following yesterday’s US announcement of a tariff exemption on refined material.
- Gold stabilises while silver drops further.
Macro
US equity markets opened higher on Thursday, recovering from the previous session’s post-Fed pullback. As expected, the Fed left its benchmark rate unchanged at 4.25%–4.50% for a fifth consecutive meeting. In the accompanying statement, Powell noted that prevailing policy remains "modestly restrictive" and that inflation risks tied to current fiscal and trade developments warrant further monitoring before any easing can be considered.
Fresh inflation data reinforced that caution. The PCE Price Index rose to 2.6% YoY in June from 2.3% in May, lifted in part by higher costs on imported consumer goods such as furniture and electronics following recent tariffs implementation. The release fuelled expectations that price pressures could reaccelerate into H2, delaying any Fed rate cut until at least October. Forward swaps are now pricing in less than a 50% chance of a 10bps cut in September. The dollar index hovered just below the 100 level, while the US 10-year yield edged down to 4.34%. In Japan, the BoJ left its policy rate steady at 0.50%, in line with market expectations.
As of July 31, President Trump has granted Mexico a 90-day extension, temporarily delaying the tariff increases originally scheduled to take effect on August 1, although elevated tariffs remain in place. Under this interim arrangement, Mexico continues to face a 25% tariff on vehicles and a 50% tariff on metals, including steel, aluminium, and copper, with negotiations ongoing to finalise a longer-term trade agreement. Several other major economies, including Canada, India, Brazil, and China, have not yet reached definitive agreements, leaving them exposed to tariff increases as Trump firmly rules out any further deadline extensions. In contrast, South Korea, Vietnam, Japan, and the EU have secured preliminary deals, though these agreements still impose higher tariffs compared to the pre Liberation Day trade landscape.
Base Metals
Base metals weakened today, driven by copper volatility, as the Trump administration announced the exclusion of refined copper from US tariffs, which is the most imported form of copper into the US. This decision led to a significant decline in COMEX copper futures, erasing as much as 25% in two days, as the markets largely disregarded the impact of tariffs, with the premium over the LME now at $235/mt. This is likely to contribute to further weakness in copper prices on the LME in the near term, with the $9,500/t a key level to watch.
Today, copper prices experienced volatility, briefly jumping above $9,800/t in overnight trading before correcting to $9,611/t later in the day. While Trump introduced a trade deal extension for Mexico, the country is still subject to 50% on copper, aluminium and steel. Mexico and Canada are responsible for the majority of aluminium impots into the US. Today's decline in aluminium prices on the LME, despite tariffs remaining in place, suggests that copper is driving the broader weakness across the complex.
Aluminium fell below the psychological support level of $2,600/t, targeting the next key support level of $2,550/t, a break below which could trigger strong technical selling to $2,450/t. The rest of the complex followed suit, with lead and zinc both testing support levels of $1,970/t and $2,750/t. Both metals managed above these levels, coming back to $1,970.50/t and $2,760/t, respectively. Nickel dipped below $15,000/t to $14,936/t. Tin sold off to $32,710/t.
Precious Metals and Oil
Gold edged higher following Wednesday’s decline, but gains were modest, with prices failing to reclaim the $3,300/oz level. Silver extended its sharp pullback, retreating to $36.50/oz. Oil prices drifted lower, with WTI at $68.80/bbl and Brent at $72.50/bbl at the time of writing.
All price data is from 31.07.2025 as of 17:30