Top five things you need to know about commodities
Commodities are the lifeblood of commerce and economic growth. Daily FX, the leading portal for forex trading news, has built an interactive tool showing global commodity imports and exports over the last decade.
This unique tool allows traders to spot developments in the flow of commodities and the growth of both supply and demand while comparing the changes to critical economic indicators.
‘Global Commodities’ takes the form of a re-imagined 3D globe where the heights of countries rise and fall to show the import and export levels of a range of commodities over the last decade. The data visualisation allows users to switch views from a single commodity or market and show information relevant to that commodity or market’s performance.
John Kicklighter, Chief Currency Strategist at DailyFX, has used the tool to put together his top five things you need to know about commodities:
1. Will the US-China trade war lead to trade peace and synchronous growth to help commodities?
The US-China trade war is seen globally as a hindrance to growth, and as such, a hindrance to the demand for commodities. The International Monetary Fund warned governments to be “very careful” and that the global economy remains vulnerable, and presumably, so do commodities until the issue is sorted out.
2. Will the US dollar strength continue and continue to suppress commodity price gains?
Since commodities are priced in US Dollars, a stronger USD as evidenced by the 6% gain in the US Dollar Index since the start of 2018 has had a positive impact on commodity price gains.
3. Will inflation pop up to increase the demand for commodities as a value store?
The lack of inflation has baffled central bankers and kept speculative buyers of commodities at bay.
4. Could a renewed China stimulus plan give industrial metals like copper the price boost and reverse weak sentiment?
Chinese stimulus via credit growth and top-down building projects have helped commodities in recent years find renewed demand, and the hope among commodity buyers is that there is more stimulus left in the tank.
5. Will US manufacturing turn around after falling at the start of 2019 to also lift commodities’ outlook?
A significant reading of the US Manufacturing Sector, the Institute of Supply Management recently touched the weakest levels since 2016 alongside Chinese Manufacturing weakness that has heavily weighed on commodities in general and especially metals like copper.