It’s all about the dollar

Commodity prices rose again in April on a combination of persistent weakness in the US dollar and investor optimism about a recovery in Chinese demand. While our long-held view has been that industrial commodity prices, in particular, would recover this year, we are a little concerned about the scale of recent gains. Indeed, prices are starting to look vulnerable if, as we expect, the US economy bounces back after its relatively poor performance in Q1 and the Fed resumes hiking interest rates.