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“We made this earlier call for global industrial downturn, and it meant that you would see this slowdown in both industrial material prices and industrial raw material prices, and the top line of the graph shows it,” Achuthan told CNBC’s “Trading.” Nation ”on Thursday.
The price index for industrial materials from ECRI shows the growth rate at the lowest level in about a year after a sharp increase from mid-2020 to early 2021.
“This weakness in industrial materials inflation and commodity price inflation is also negative for commodity currencies such as the Canadian dollar or the Australian dollar, as these are commodity exporting countries and are more dependent on commodity exports,” said Achuthan.
The Canadian and Australian dollars, both commodity currencies, are closely tied to commodity price inflation and the fact that they have started moving confirms the decline in industrial price inflation, he said. The Canadian dollar is closely tied to the price of oil, while the Australian dollar has a high correlation with oil and gold.
This could indicate difficulties for both commodities trading and other areas of the market, Achuthan said.
“A lot of people are excited about the rise in commodities. We say look the other way. It has repercussions for commodity currencies against the dollar. And that has repercussions for other asset classes, I think – what happens to some of those currencies can obviously affect commodities themselves, bonds and even stocks, ”he said.
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