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Demand concerns back on the menu

Commodity prices generally fell earlier this week on the back of investors’ growing concerns about the outlook for commodities demand. Later in the week, the release of softer-than-expected US Q1 GDP data did nothing to soothe those fears. We expect activity in advanced economies to deteriorate over the rest of this year, which is why our FX Markets team forecasts a stronger US dollar by end-2023. Taking these together, we think that most commodity prices will struggle to make gains over the next 3-6 months.

Closer to home, we published the first edition of a joint quarterly publication with our Climate team. The Green Transition Chart Book tracks new developments and provides insights on the transition to a greener economy. As part of this green transition, the link between economic growth and energy consumption will weaken. We laid out our long-term energy market forecasts in this Energy Focus.

There will be a raft of data releases next week to capture the attention of commodity markets. We expect a fall in China’s manufacturing PMIs, given the limited scope for activity to rebound and softening activity abroad, which could disappoint industrial metals markets. Elsewhere, we think the Fed will deliver one final 25bp hike on Wednesday. This has been well telegraphed, so any price reaction will probably hinge on whether officials leave the door open to further hikes in the minutes. On Friday, the US employment report is likely to show that employment growth continued to trend lower last month. 

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