Commodities: Dollar strength amid weak data, cautious forecasts weighs on prices

Commodities retreated as investors pushed the US dollar to a four-month high and the International Monetary Fund opted to take an optimistic view on the likely impact of Brexit, even while cautioning that its forecast assumed Britain and the European Union would avoid a “large increase in economic barriers”.

As of 20:52 BST the US dollar spot index was rising by 0.52% to 97.061, while Bloomberg’s commodity index was slumping 0.90% to 85.7484.

Pushing the greenback higher was a report from The Wall Street Journal’s closely-followed ‘Fed-watchers’, according to whom US rate-setters were feeling more confident about hiking rates this year, perhaps by September.

A very weak reading on German investor confidence in the wake of the referendum vote was also a hefty contributor to dollar strength on Tuesday.

Soft commodities witnessed the largest drops, with December 2016 Chicago Board of Trade corn futures dropping 4.06% to $3.4850 per bushel as of 21:05 BST.

Wheat and cocoa futures on the CBoT were similarly weak, with the September 2016 contract for the former down by 2.68% to $4.1800 per bushel and similarly-dated contracts for the latter off by 2.82% to $2,998.00 per metric tonne.

Acting as a backdrop, West Texas Intermediate was again leading to the downside, with futures for next month delivery off by 1.48% to $44.57 per barrel.

September 2016 Brent on the other hand was off by a more circumspect 0.66% to $46.65 per barrel.

One unconfirmed report cited a Libyan official who said exports had resumed from the country’s Hariga terminal.

To take note of, gold futures were holding slightly higher despite the strength in the US dollar.

Silver futures on the other hand were falling by 0.50% to $19.98 on COMEX.

On Tuesday, analyst Jonathan Guy at Numis revised his long-term gold price assumption from $1,350/oz. to $1,400/oz.. He also raised that for silver from $20/oz. to $25/oz..

Lastly, three-month LME traded copper futures closed 1.4% higher at $4,975.0 per metric tonne in London trading.

However, overnight steel and iron futures fell in Chinese trading, with October rebar futures in Shanghai adding another more than 5% fall to Monday's losses.