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Copper reverses four days of declines on weaker dollar, ECB meeting, U.S. data in focus

Copper snapped four days of declines on Wednesday after upbeat service sector data from Europes leading nations strengthened the euro and pressured the U.S. dollar, adding to Mondays overall positive manufacturing PMI readings. Market players remained cautious ahead of ECBs policy meeting on Thursday and the release of key U.S. economic data, which will provide clues of when the Federal Reserve might begin paring its monthly bond purchases.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in December traded at $3.272 per pound at 9:58 GMT, up 0.42% on the day. Prices shifted in a days range between $3.251 and $3.275 a pound. The industrial metal lost 0.1% on Tuesday, a fourth consecutive daily retreat, but trimmed its weekly decline to 0.8% on Wednesday.

Copper regained some positions after upbeat non-manufacturing PMI data from Europe’s leading nations strengthened the euro and pressured down the U.S. dollar. Spain’s services PMI defied analysts’ projections for a drop to 48.1 from September’s 49.0 and surged to 49.6, nearing the neutral level. Italy’s service sector growth slowed from September’s 52.7 but was still in the expansion zone at 50.5. France’s non-manufacturing PMI surged to 50.9, outperforming projections to remain unchanged at 50.2, followed by an improvement in Germany, whose service sector activity expanded to 52.9, beating expectations to remain flat at 52.3. The Euro zone’s Final Services PMI surprised positively as well and rose to 51.6, exceeding expectations for expanding at the same pace as in September at 50.9.

Also pressuring the U.S. dollar and boosting demand prospects, Great Britains manufacturing production rose by 1.2% in September after declining by 1.2% in August, beating projections for a surge by 1.1%. Year-on-year, factory output matched expectations and expanded by 0.8% after it fell by 0.2% in the preceding month.

The U.S. dollar index, which measures the greenbacks performance against a basket of six major peers, fell to 80.62 by 9:59 GMT, down 0.22% on the day. Prices held in range between days high and low of $80.80 and 80.54 respectively. The December contract added 0.2% on Tuesday but extended its weekly decline to over 0.2% on Wednesday.

Todays upbeat service sector data added to Mondays positive manufacturing PMI readings from the Euro zone, which boosted the industrial metals demand prospects.

Copper also drew support after China’s Vice Premier Zhang Gaoli said earlier in the week that economic conditions are stable and that the country can meet its main economic targets this year. His statement comes after China’s National Bureau of Statistics reported on Sunday that the Asian nation’s non-manufacturing PMI rose to 56.3 in October from 55.4 in September, suggesting the world’s second-largest economy will likely meet the government’s goal for a 7.5% economic growth this year. Last week, the government agency reported that the Asian country’s manufacturing Purchasing Managers’ Index (PMI) rose to a 18-month high of 51.4 in October from 51.1 in September, beating analysts’ predictions for a surge to 51.2.

A separate private report by Markit Economics and HSBC showed China’s manufacturing sector expanded at a faster pace than the preceding month and matched a preliminary reading. The HSBC China Manufacturing PMI surged to 50.9 last month, beating September’s 50.2.

U.S. data

Market players eyed the upcoming key U.S. GDP and unemployment data on Thursday and Friday to assess when the Fed will most likely commence trimming its monetary easing program. On Thursday, the preliminary reading of the U.S. Q3 GDP growth may show a smaller expansion compared to the preceding three months. Personal Consumption Expenditures probably fell in the third quarter, while core consumer spending is expected to have advanced.

On Friday, October’s non-farm payrolls are projected to have further eased, while the unemployment rate likely inched up to 7.3%, according to analysts’ expectations. Personal income and personal spending are projected to have risen at a slower pace from a month ago. The preliminary reading of the Thomson Reuters/University of Michigan Consumer Sentiment Index may show a rebound to 74.5 in November, up from 73.2 in October.

Meanwhile, investors remained wary ahead of ECBs policy meeting on Thursday when some banks, including UBS AG and Bank of America Corp., projected the Euro zones refinancing rate will be cut to 0.25%.

Xu Liping, an analyst at HNA Topwin Futures Co. in Shanghai, said for Bloomberg: “Investors are hesitant because the interpretation of the U.S. data and the European monetary policy could indirectly impact when the Fed starts tapering bond purchases.”

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