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Citi Research says the long-standing inverse correlation between the US dollar and commodity prices broke down in late 2016 and is unlikely to return. In Q4 2016 the Goldman Sachs Commodity Index rose 9% while the dollar gained about 7%.
Citi attributes the divergence to improving risk sentiment and monetary tightening expectations since 2013.
Buyers can no longer assume a stronger dollar will automatically cheapen feed grains, soymeal and other dollar-priced commodities, so currency moves should be weighed separately from fundamentals.
cnbc.comHuileng TanMar 7, 2017After 359 past neutral macro events, DXY moved a median -0.0% over 5 sessions (49% higher; middle half -0.4% to +0.4%), and -0.1% over 20.
After 78 past neutral macro events, CORN moved a median +0.3% over 5 sessions (55% higher; middle half -1.1% to +1.6%), and -0.6% over 20.
After 50 past neutral macro events, SOY moved a median -0.3% over 5 sessions (48% higher; middle half -2.2% to +1.3%), and -0.8% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
