Commodities rise ahead of Wednesday FOMC meeting

15.23 AEDT, Tuesday 11 December 2012

Commodities rise ahead of Wednesday FOMC meeting

By Ben Taylor (Sales Trader, CMC Markets)

Neither renewed concerns over Italy or problematic Chinese trade data in the last few days could stop the market taking commodity prices higher. The main reason for the buying is Wednesdays FOMC meeting where traders are desperately trying to predict the Fed’s next course of action.

Another reason for buying commodity based markets is the belief that early next year we could see a new round of Chinese stimulus.

Any further stimulus is positive for commodity’s which moves have manifest themselves into a higher materials sector of late. It seems the Christmas rally is about getting ahead of the FOMC meeting and staying ahead of any potential Chinese stimulus early next year.

The cliff is however still likely to be the other topic traders contemplate into the end of the year. The Chinese trade result shows us just how sensitive other economies are on the US getting its policies in order. Everyone is keen to get this issue behind us however whilst it seems the market is now pricing a resolution in before Christmas and any change to that belief could spell a major u-turn in confidence.

The Australian NAB business conditions and confidence numbers was a led weight around the Australian dollar today. The survey is considered a forward indicator signifying that the surveys deep falls could spell a greater need to cut interest rates into the future to help protect an economy on the back foot.

The drop in interest rates seems to have done little to help our economy from slowing especially as mining investment growth slows. A drop in wages and new orders, worries about tighter fiscal policy, the high Australian dollar and the soft global economy is also plaguing the minds of business.

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