Global growth concerns hit commodity prices – Danske Bank

By FXStreet FXStreet (Delhi) – Senior Analyst, Jens Nærvig Pedersen at Danske Bank, suggests that global real economic growth and income growth have been slowing partly due to central banks repeatedly undershooting their inflation target which has led commodity markets to start to prepare for a potential global economic recession this year, in turn leading to a significant price slump.

Key Quotes

“In the coming months it will therefore be imperative for the downtrend in commodity prices to reverse, in our view, that the Federal Reserve eases on its tightening bias, the European Central Bank lives up to recent hints about more stimulus and the People’s Bank of China gains room to ease on the defence of its currency.

Oil

Weak global income growth will keep a lid on the oil price during the first half of 2016. In the latter half of the year and in 2017 this should improve and lead to a gradual rebalancing of the oil market. Along with an expected drop in the USD this should help prices to recover. We recommend consumers to hedge exposure in H2 16 and 2017.

Metals

Overall, stronger global real economic growth and income growth towards the end of the year, a weaker USD and weaker CNY …read more

Source:: FX Street