US and China data to steer prices next week

Even though US non-farm payrolls increased by 311,000 in February, the report contained signals that were consistent with slowing inflation, prompting a fall in US interest rate expectations today. Despite this, commodity prices are still broadly down on the week, as Fed Chair Powell’s comments on Tuesday that interest rates are “likely to be higher than previously anticipated” cloud the demand outlook. Powell’s comments led our US Economics team to raise their peak Federal Funds Rate forecast to 5.25%-5.50%.

Next week, US February inflation data will be released on Tuesday. If annual inflation comes in above the economist consensus of 6%, then commodity prices could fall. Our own forecast is in line with consensus. On Wednesday, the release of China’s industrial production, retail sales and fixed investment data for January-February could give prices a lift if they show that the economic recovery there is gathering steam.