Analysts at Nomura explained that most of the commodity prices have gained momentum since the US Presidential election, while commodity prices had already been supported by the recovery in the Chinese economy before the US election.
Key Quotes:
"Prices of coal, iron ore and oil tend to be more sensitive to the Chinese economy. Chinese economic trends will be important for the relative value of G10 FX, even though USD is currently more determined by expectations for economic policy under the new US administration and Fed policy. It is also worth noting that USD is becoming less sensitive to commodity price movements.
If the Chinese economy performs resiliently even amid higher US rates, JPY is estimated to be the clear underperformer, while the commodity currencies, AUD, NZD, NOK and CAD are likely to perform. One standard deviation improvement in global equity prices (4.4%), the Chinese PMI (0.7pt) and the US ISM (1.6pt) are estimated to largely offset the negative impact of a 20bp increase in US rates on AUD/USD and other commodity currencies against USD. In contrast, the combination of higher yields with the Chinese economic slowdown would weaken commodity currencies more than JPY."
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