Commodity markets rebound following facing turbulent last year
(MENAFN) The commodity markets faced a turbulent 2024, marked by significant fluctuations driven by various factors including rate cuts, geopolitical tensions, uncertainties surrounding U.S. politics, and global recession concerns. Price surges were fueled by expectations of increased demand following the Federal Reserve’s rate cuts, China’s efforts to stimulate its economy, and retaliation against U.S. sanctions, as well as global weather events. However, historic selling pressures emerged as fears about a slowdown in U.S. economic activity led to declines in several commodities.
Despite the geopolitical risks pushing some commodity prices higher, the Federal Reserve's expected slower rate cuts and concerns about demand from China weighed on the markets. Analysts observed that U.S. macroeconomic data indicated a resilient economy, but these positive signs were overshadowed by external factors. The U.S. dollar strengthened following President-elect Donald Trump’s victory in the November elections, which boosted demand for the currency. The strengthening dollar, combined with market expectations of higher interest rates, pressured commodity prices.
Trump’s trade policies, particularly his tariffs, were expected to add more strain to international trade, exacerbating pressures on the commodity market. The stronger dollar dampened risk appetite, further influencing market sentiment. Analysts also noted that Trump’s policies could exacerbate inflationary pressures, which may prompt the Federal Reserve to slow its rate cuts.
In December, the Federal Reserve cut its policy rate by 25 basis points, aligning with expectations and bringing the rate to a range of 4.25 percent-4.50 percent. By the end of the year, the Fed had implemented three rate cuts, shaping the commodity market dynamics as it navigated the challenges of 2024.
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