Here's why the second half of 2022 will be big for commodity prices [Video]
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As we come to the end of the 2nd quarter and head into the 2nd half of 2022 – Rapidly Surging Inflation, Rate Hikes and Recession Risk are now emerging as the three biggest macro themes driving the financial markets.
There is no denying that the previous quarter was monumental for monetary policy as central bankers across the world ramped up their fight against rapidly surging inflation while acknowledging that inflationary pressures could persist for years – driven in part by the war in Ukraine, worsening supply chain disruptions and effects of COVID related shutdowns in China.
Last month, in a “belated response” to the fastest rise in inflation seen in over 40-years – the Federal Reserve raised interest rates by 75 basis points – the biggest increase since 1994 with Fed Chairman Jerome Powell signalled yet another jumbo sized hike in July.
And the Fed was not alone on this path.
One day after the Federal Reserve's biggest interest-rate hike in 30 years – many other central banks jumped on the Rate Hike bandwagon, scrambling desperately not be left behind – in what can only be described as a panic move – unleashing havoc across the financial markets.
The Swiss National Bank made a surprise 50 basis points rate hike for the first in 15 years. While the Bank of England moved rates to the highest level in 13 years as it anticipates inflation to hit 11% this year.
Elsewhere, the Reserve Bank of Australia equally surprised the market with a 50 basis point hike, while The Reserve Bank of New Zealand and The Bank of Canada followed suit with their own 50 basis point rate hikes.
In total, more than 60 central banks faced with rapidly surging inflation have now joined the global race to hike rates aggressively at any at any cost necessary.
With inflation running out of control, the only plausible option left now is for central bankers to continue raising rates aggressively until policymakers break inflation, but this may also come at the risk of breaking the economy.
This is return as increased the odds of a recession to 85% – with a long list of leading Wall Street banks predicted “significant risk” of a recession by mid-2023.
Looking ahead, rate hikes will remain the primary focus for traders in July with a long-list of central bank monetary policy meetings back on the agenda again and more surprise hikes almost inevitably likely.
Right now, Commodities remains a traders' market packed with endless opportunities to capitalize on the short-term macro-driven volatility.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions.
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