Following the Fed’s rate resolution, most major commodities fell in price on Thursday, most notably precious metals palladium and platinum, which fell more than 11% and 6.9%, respectively. In other varieties, corn futures fell nearly 7%, copper futures fell 4.6%, and oil prices also fell more than 3% at one point, but then rebounded. Domestic industrial metals fell in general, as of Thursday’s overnight close, Shanghai copper fell 2.59%, Shanghai aluminum fell 1.47%, Shanghai zinc fell 3.49%, Shanghai lead fell 1.37%, Shanghai nickel fell 0.84%, and Shanghai tin fell 1.68%.
According to CNBC, if you stretch the timeline through the week, almost all major commodities saw price declines, with corn and soybeans recording double-digit losses, and soybean futures having erased 2021 gains and falling more than 20% from their eight-year high in May. Lumber is down nearly 10%. And most of the other major varieties are down more than 4%.
Meanwhile, the U.S. dollar index is all the way up. As of this writing, the dollar index is at 91.93, having risen more than 1.5% this week, and pulling out back-to-back positive days on Wednesday and Thursday.
Last day, the Federal Reserve announced its interest rate resolution. The Fed kept the scale of bond purchases unchanged, raised the upper and lower limits of the policy rate range IOER and reverse repo rates, the statement did not mention the reduction of QE, reiterating that inflation rose due to temporary factors. Point chart shows that more than 70% of Fed officials expect to raise interest rates in 2023, more than 60% of officials expect to raise rates twice in the same year, while less than 40% of officials expected to raise rates in 2023 in March.
The Fed’s stance is more hawkish than market expectations, making Wall Street “dare not” continue to bearish on the dollar. After the meeting, Goldman Sachs and Deutsche Bank both gave up the short-term depreciation of the dollar forecast. Deutsche Bank believes that the Federal Reserve for the euro / dollar upward support no longer exists – the current “U.S. yield curve front-end real interest rate repricing space”, “volatility also has room to rise “, both of which are favorable to the dollar. Commodity prices have generally weakened during the strong dollar.
Bloomberg commentator Jake Lloyd-Smith said in an analysis piece that global commodity markets could see a major turnaround in the coming quarter, with the wild rally seen in the previous epidemic being replaced by a more moderate performance. He believes that commodities as an asset class will not go down, but it will be more difficult to make gains. For the reason that commodities are difficult to rise, he gave the following reasons: one, in the next three months, including the Federal Reserve, central banks will continue to scale back monetary stimulus measures; second, the supply bottleneck that fuels commodity prices will be opened; third, the recovery of the dollar may become another negative factor.
But there are those who offer a different view. Wall Street News previous article cited analysts point out that some commodity prices slowed down or fell, does not mean that the CPI or PPI data spike is a false signal, after all, in the context of economic recovery there are still many areas of supply shortage or strong demand phenomenon, and make the relevant commodity prices climb. But for the Fed, because it is in a critical point of whether and when to taper QE (taper), so the slowdown or decline in some commodity prices, for the Fed’s “dovish” position and continue to remain patient to provide a signal and reason.