Fed’s rate call eyed for commodity direction

PublicationNatural resources

Expectations about Fed rate cuts proved to be supportive for alternative investments like US dollar-denominated commodities. As we expect a lower probability for a larger than 25bp rate cut than the market is pricing in, there is a risk of disappointment in commodity markets. This may result in some profit taking on the longs and thus add some pressure later this month if the Fed cuts by ‘only’ 25bp.

On top of that, the lingering trade dispute between US and China continues to cap upside potential. As a result, the CRB-Index continued to trade within the 180-195 range (currently at 187).