Mixed economic outlook poses a quandary for prices

It was a relatively quiet week in commodities markets, with weakness in the US dollar giving agricultural commodities, in particular, a bit of a lift. We think markets could struggle to find a clear direction in the coming weeks given the mixed messages on the economic front. The US economy looks poised for strong growth, while many European countries have re-imposed national lockdowns. At the same time, there are signs that China’s policymakers are tightening the reins on policy. Indeed, the focus is likely to be on China next week given a slew of March economic data (trade on Tuesday, industrial activity on Friday) and the Q1 GDP release (Friday). Although headline numbers will be large owing to flattering base effects, high frequency data point to an uptick in underlying activity in March. While commodity markets have probably priced in strong Chinese data, it could still be a factor supporting prices next week.