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Copper under pressure on US Fed rate cut outlook

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Updates prices

By Julian Luk

London June 13 (Reuters) -Copper prices slipped on Thursday while the dollar steadied after the U.S. Federal Reserve pushed back a potential interest rate cut to the end of the year.

Three-month copper on the London Metal Exchange (LME) CMCU3 slipped 1.7% to $9,775 per metric ton at 1611 GMT.

The dollar gained strength although the U.S. producer price index (PPI) fell unexpectedly in May to suggest easing price pressures. On Wednesday, the U.S. consumer price index (CPI) for May was also softer than expected.

Slower inflation typically boosts hope for rate cuts and puts pressure on the dollar.

But optimism over cooling inflation was not enough to keep the dollar down after the Fed's hawkish statement to keep higher interest rates longer.

"Sentiment was bullish after the U.S. inflation data yesterday but then the Fed statement after the LME close suggested that there would only be one cut this year," said Robert Montefusco at Sucden Financial.

Montefusco said profit-taking over the last few weeks had weighed on prices, with $9,500 a key support level.

"Prices will be rangebound until we get better numbers out of the China market on the demand narrative," he said.

Indicators include the purchasing managers' index that gauges the manufacturing activity of top metals buyer China due at the end of the month. Before that, there will be China's loan and total social financing, which indicates credit availability for businesses. <CHN EM>

Copper buyers are still not back in the market, although prices have retreated 11% from an all-time high of $11,104.5 in May.

"Markets seem to be reverting their focus to fundamentals. These do not look all that inspiring," Ed Meir, a consultant of brokerage Marex wrote in a note on Thursday.

Meir cited traders that copper scrap - an usual substitute to refined copper when prices are high - "are not moving out easily", with demand from automobile sector particularly weak.

Lackluster demand is also reflected in rising inventory.

More copper was delivered to LME-registered warehouses in Taiwan and South Korea on Wednesday, as Chinese producers took advantage of high LME prices in May to export copper.

LME copper inventories have risen 22% to 127,343 tons over the last month. MCUSTX-TOTAL

LME aluminum CMAL3 fell 1.3% to $2,542.50 a ton, nickel CMNI3 declined 2.3% to $17,650, zinc CMZN3 shed 1.6% to $2,849, lead CMPB3 dipped 0.5% to $2,162.50 and tin CMSN3 lost 2.2% at $32,635.

Reporting by Julian Luk in London
Editing by Mrigank Dhaniwala, Jason Neely, Tasim Zahid and Shreya Biswas

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