LONDON: Copper prices drifted lower on Wednesday as speculators stepped up selling on the back of U.S. inflation data that fuelled concerns that cuts to high interest rates would be delayed.

Three-month copper on the London Metal Exchange (LME) was down 0.4% at $8,229 a metric ton by 1030 GMT.

U.S. data on Tuesday showed consumer prices increased more than expected in January, causing traders to pare back expectations for the pace and scale of interest rate cuts.

Federal funds futures currently price in no rate cut in March and a lower than 50% chance of easing in May, according to LSEG’s rate probability app.

“It’s a macro-driven move after the biggest data release of the month, so it has a big ripple effect through all markets,” said Dan Smith, head of research at Amalgamated Metal Trading.

“There’s been a fairly decisive move recently by specs to go short and longs to liquidate in copper. In the short term it feels like there’s a lot of pressure to go a bit lower, but there’s a lot of support around $8,000.”

Copper edges lower; China closed for New Year

LME copper has shed 5.5% since touching a one-month peak of $8,704.50 on Jan. 31, pressured by worries over Chinese demand and reduced expectations of interest rate cuts.

The dollar index, meanwhile, was trading near three-month highs. A stronger U.S. currency makes dollar-priced metals more expensive for buyers using other currencies.

Many analysts and investors, however, believe copper will bounce back eventually because of a tight market.

“We remain positive on copper due to renewed supply challenges. A tight concentrates market, created by recent mine closures, has seen smelter processing fees falling sharply,” said ANZ analyst Soni Kumari.

Zinc fell 0.3% to $2,308 a ton after more inflows of metal into LME warehouses, pushing up the total to 254,825 tons for its highest in 32 months.

In other metals, LME aluminium eased 0.7% to $2,211 a ton and tin dropped 1.3% to $27,205 while nickel added 0.3% to $16,315 and lead gained 0.7% to $2,012.