Most commodity prices tracked the US dollar this week, falling sharply at the start of the week before staging a partial recovery in the latter half. Further dollar appreciation is likely given that the Fed looks set to raise its target rate by a chunky 75bp at its meeting next Wednesday. Though such a sizable rate hike is already largely priced into markets, we still expect it to keep a lid on commodities prices.
Elsewhere, the cessation of the Party Congress in China without any revision to the zero-COVID policy worsened the outlook for industrial metals demand.
Looking ahead to next week, commodity prices will take direction from a number of data releases and events. Early in the week, China’s October PMIs should confirm that COVID-related restrictions and the worsening global economic outlook are lowering domestic and overseas consumption alike. Meanwhile, on Friday, the US October labour data may help to cement the view that the Fed’s expected 75bp rate hike on Wednesday will be the last of that size. And closer to home, we plan to publish our Q4 2022 Commodities Outlook next week.
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