It has been a relatively quiet week in commodities with the different sectors trying to weigh the impact of several key developments such as the weaker dollar, rising equities, trade talks as well as Brexit developments. The IMF downgraded global growth to the lowest level since the global financial crisis while China, the world’s biggest consumer of raw materials, saw its Q3 GDP slow to 6%, the weakest since the early 1990’s.
A combination of a weak demand at home and lower exports due to the ongoing trade war with the U.S. has taken its toll on Chinese growth, although recent economic data point to signs of green shoots beginning to emerge.
The USD weakness was spearheaded by GBP and EUR strength. The potential for a Brexit deal helped drive Sterling to a five-month high while the euro, the favourite short among speculators, reached a seven-week high.
The potential for a mini-trade deal between the U.S. and China, which could be signed in November at the APEC summit in Chile, helped support those agriculture commodities that may receive a boost from increased Chinese demand.
In addition to the prospect for increased demand from China, key crop prices in the U.S. are now also being supported by the impact of the delayed planting season leading to a delayed harvest. The yet to be harvested crops of soybeans and corn may increasingly be left vulnerable to extreme cold and rain. Something that ultimately could lead to a price supportive reduction in output.