Dealmaking was a major driver of commodity prices this week. The 11th hour extension of the Black Sea Grain Initiative alleviated fears of Ukraine’s grain exports being cut off from world markets, pushing corn and wheat prices down. And in the US, optimism that a deal would be reached on raising the debt ceiling helped boost oil prices but weighed on gold prices. We suspect that a higher debt ceiling is now largely priced into markets and commodity prices won’t move too much when an agreement is finally reached.
Next week, May flash PMIs for the US and the EU on Tuesday should give a steer on how economic activity is holding up in those regions. Oil prices may rise if it appears activity remains strong in the face of higher interest rates. And on Friday, the US will release core PCE for April which should provide an indication of whether prices pressures are starting to ease. If they are, commodity prices may get a lift on expectations of a lower US dollar.
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