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Demand fears in the driving seat, for now

Most commodity prices fell this week as global monetary tightening and fears about economic growth intensified. The high June inflation reading in the US nails on another large rate hike at the FOMC’s meeting in July. And central banks in Canada and parts of Emerging Asia have also delivered hawkish surprises this week. Moreover, we expect our China Activity Proxy to show economic growth close to zero in 2022, and we are now forecasting a mild recession in Europe during the winter. These growth concerns are weighing on the outlook for commodities demand, and investors have generally responded by becoming more risk averse, with sharp falls in net-long positions and open interest in futures markets in most commodities.    

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