- Commodities react to latest U.S. jobs data.
- Market downward revision of a 50 basis point FED hike.
- Ban on unprocessed and under-processed minerals.
- China re-opening drives up commodity prices.
Although the jury is still out and awaiting US CPI data (which is set to be released on Thursday), the net market perception is geared towards an expectation that The Fed will loosen its aggressive stance on monetary policy. Thus the probability of an increase of 50 basis points by February has been revised downwards to 25 basis points. This expected easing has been reflected in a weaker dollar, as measured by The US dollar index.
Coupled with a U-turn in Beijing’s stance on COVID-19 restrictions, commodity markets are expected to strengthen.
However, while analysts’ predictions range from bullish to bearish, the consensus is that commodity markets are not expected to grow to the historic levels reached in 2022. The driving factor in commodity markets in the previous year where inflationary and is expected to reverse as the hawkish stance of the Fed continues. The sentiment is supported in a Yahoo Finance report where economists are said to expect a decrease in both headline and core inflation rates from 7.1% to 6.6%, and from 6% to 5.7% respectively.
Commodities around the world, along with commodities in Zimbabwe, are traded and denominated in US$. Therefore, a weakening in the currency results in commodities being relatively cheaper. This is set to drive up demand.
Furthermore, with China re-opening the demand for commodities is expected to increase and thereby drive up commodity prices. The benefit of this expected strengthening of commodity prices may not be reflected in Zimbabwe’s export revenue given the ban on all ores and under-processed minerals.
-Equity Axis News