Fresh from the Trading Room: Commodities comeback
The opinions expressed in this report are those of Inspirante Trading Solutions Pte Ltd (“ITS”) and are considered market commentary. They are not intended to act as investment recommendations. Full disclaimers are available at the end of this report.
Executive Summary
The Federal Reserve's 50 bps rate cut marks the start of the rate-cutting cycle. The equity market responded positively to the larger-than-expected cut, and a weaker U.S. dollar has created favorable conditions for commodities and other global currencies. While the commodity markets have borne the brunt of recession fears, historical trends show rallies in energy, agriculture and industrial metals during rate-cut and dollar weakening cycles. With potential Chinese stimulus, are we seeing a surge in commodities amid the macro shift?
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Upcoming economic events (Singapore Local Time):
Investors will closely monitor inflation and employment figures, as Fed Chairman Powell reiterated the central bank’s data-dependent approach to determining future policy rate decisions.
Markets in focus
Figure 1: AUD/USD Futures (Weekly)
The AUD/USD pair has been consolidating in a symmetrical triangle formation since early 2023. It is now on the verge of an upside breakout, driven by broad U.S. dollar weakness following the Fed’s first rate cut in this cycle.
Figure 2: USD/CNH (Weekly)
The USD/CNH has weakened significantly, defying expectations of continued renminbi depreciation due to China’s economic challenges. The pair has broken a multi-year ascending trendline and historical precedence suggests further CNH strength could follow.
Figure 3: WTI Crude Oil Futures (Weekly)
