Commodities are linked with currencies, especially the USD, and they usually share an inverse relationship. A weaker USD should provide some support to commodity prices in 2023, strategists at ANZ Bank report.
Supply-side issues are now subsiding
“The likely return of the traditional inverse relationship between commodity prices and the US dollar has important implications for commodity markets. With inflation easing, a weaker USD should be a tailwind for the sector.”
“Supply-side issues are now subsiding. Energy shortages in Europe have eased, and the number of disruptions to metal and oil supplies is also past its peak. So, the commodity price-USD relationship should re-emerge in 2023.”
“With the Fed’s aggressive rate hike cycle nearing its end, we expect the USD to weaken, which is likely to be a strong tailwind for commodity markets.”
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