Futures
July 30, 2020
Commodities—Are We Sowing the Seeds of Inflation?
Written by Tim Stevenson
SMU contributor Tim Stevenson is a partner at Metal Edge Partners, a firm engaged in Risk Management and Strategic Advisory. In this role, he and his firm design and execute risk management strategies for clients along with providing process and analytical support. In Tim’s previous role, he was a Director at Cargill Risk Management, and prior to that led the derivative trading efforts within the North American Cargill Metals business. You can learn more about Metal Edge at www.metaledgepartners.com. Tim can be reached at Tim@metaledgepartners.com for queries/comments/questions.
We will narrow our focus to the ferrous complex later on in the article, but it is valuable to look at some big-picture trends that tend to influence commodity prices. Let’s start with a look at the U.S. dollar. The dollar has been weakening versus major foreign currencies since the peak of “fear” that we saw when the COVID crisis was first unfolding. When investors are fearful about the future, they normally flock to the dollar as a safe haven, likely causing the big spike in the dollar in March. However, since then it has been nothing but a downhill slide for the Greenback. Here is a chart of the DXY, which is an index of the U.S. dollar versus other major currencies:
