Commodity markets surged as traders sold the U.S. Dollar and used the proceeds to invest in higher risk assets. Commodity and equity futures were up across the board as selling pressure hit the Dollar from the opening today. Today’s rallies came as a surprise as many traders had anticipated a quiet trading session ahead of tomorrow’s FOMC meeting.
The U.S. Dollar plunged to a new low for the year as global investors aggressively bought higher risk assets such as equities and commodities. The fact that this buying took place one day ahead of the Fed’s FOMC meeting indicates that traders have confidence that the Fed is going to leave interest rates at historically low levels for some time.
Equity markets regained some of their losses from the past few days to post modest gains today. Heavy buying from Asia and Europe overnight helped provide the early support. The acceleration to the upside occurred as the Dollar weakened throughout the New York trading session. Financial stocks led most of the rally today.
U.S. Treasury futures also posted a gain despite the start of a new auction. Traders are anticipating fresh demand from foreign entities. Today’s action reflected the possibility that steady demand will keep yields in a tight range.
December Gold and Silver regained most of this week’s losses as the weaker Dollar drove investors into the precious metals markets. The chart patterns suggest higher markets to follow as each recent successive bottom has been higher than the previous bottoms. This indicates that investors are more interested in getting value by buying the dips rather than chasing these markets higher by hitting offers. This is also an indication that investors rather than speculators may be buying gold.
The weaker Dollar and greater demand for risky assets helped drive December Crude Oil today. Today’s reaction by investors is speculative as both the supply and demand situation still supports lower prices. A close over $75 could trigger an acceleration to the upside.
The weaker Dollar helped support November Soybeans and December Corn. Speculators are anticipating stronger foreign demand because of the weaker Dollar. This couldn’t have come at a better time as increased production has been putting pressure on the grain complex.
