Aluminium Dropped After Inflation Data Cast Doubts On Fed To Ease Interest Rates

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Aluminium Dropped After Inflation Data Cast Doubts On Fed To Ease Interest Rates
Credit: © Reuters.

Aluminium faced a decline of -0.8%, settling at 197.45, influenced by inflation data raising uncertainty about the Federal Reserve's timeline for interest rate adjustments. Trading resumed in China after the week-long Lunar New Year holiday, bringing the market's attention to economic indicators and policy decisions from the People's Bank of China (PBoC). China's current account surplus notably decreased to USD 55.2 billion in Q4 of 2023 from USD 103.1 billion in the same period the previous year.

This preliminary estimate marked the smallest surplus since Q1 of 2020, with the goods surplus falling to USD 153.6 billion from USD 161.3 billion in the prior year. The PBoC maintained the rate of CNY 500 billion worth of one-year policy loans, known as the medium-term lending facility (MLF), at 2.5%, aiming to prevent pressure on the yuan and assess the impact of recent support measures for the economy. Despite a net injection of CNY 1 billion into the system through MLF, the smallest since last August, the PBoC emphasized the goal to "maintain banking system liquidity reasonably ample," particularly after the week-long Lunar New Year holiday.

From a technical standpoint, the market is witnessing fresh selling, with a 1.1% increase in open interest to 2838, coupled with a price decrease of -1.6 rupees. Aluminium finds support at 196.6, with a potential test of 195.6 levels below. On the upside, resistance is likely at 198.9, and a breakthrough could lead to testing 200.2. Traders should closely monitor economic indicators, policy developments, and market sentiment for nuanced decision-making in the aluminium market.

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