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Demand concerns to weigh on prices for a while yet

Prices struggled to find direction this week as concerns about demand deepened at a time of still constrained supply of many commodities. The price of Brent crude fell sharply on Thursday in response to US real spending data for May, which were weaker than expected. However, it subsequently recovered and ended the week only a touch lower. With many commodity markets currently more focussed on the outlook for demand than supply, we expect macroeconomic data releases to be a key driver of prices in the coming weeks. However, next week is quite light on market-moving data, at least until Friday when the US employment report for June will be released. We forecast slower growth in payroll employment, but a still-solid 250,000 gain, which will be sufficient to keep the Fed on a path to a 75bp rate hike in July. Rising US interest rates will continue to weigh on commodities prices in the coming weeks, especially if they prompt further dollar strength. Drop-In (Weds, 6th July): How far has 2022’s food supply shock raised the stakes for monetary policymakers and governments? Join this 20-minute session to find out about the market outlook and the economic risks around elevated food prices. Register now

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