It is all about the dollar

Most commodity prices rose this week on the back of further broad-based falls in the US dollar. At the same time, the euro strengthened as ECB President Mario Draghi struck a fairly positive note at Thursday’s press conference, declaring that the robust pace of economic growth suggested that inflation will eventually rise towards target. Turning to next week, President Trump will deliver his first State of the Union address on Tuesday. He is expected to set out his infrastructure plan as the next major legislative push, which could give a further boost to commodity prices. The FOMC meets on Thursday but we do not expect any policy changes. Non-farm payrolls data on Friday are likely to be strong, underpining our forecast of a rate hike in March. Elsewhere, China’s official and unofficial manufacturing PMI surveys for January are scheduled for release mid-week and will provide an early indication of the strength of activity at the start of the year.