Commodity Markets Surge on Increased Demand for Risk
Commodity markets surged as traders sold the U.S. Dollar and used the proceeds to invest in higher risk assets. Commodity and equity futures were up across the board as selling pressure hit the Dollar from the opening today. Today’s rallies came as a surprise as many traders had anticipated a quiet trading session ahead of tomorrow’s FOMC meeting.
The U.S. Dollar plunged to a new low for the year as global investors aggressively bought higher risk assets such as equities and commodities. The fact that this buying took place one day ahead of the Fed’s FOMC meeting indicates that traders have confidence that the Fed is going to leave interest rates at historically low levels for some time.
Equity markets regained some of their losses from the past few days to post modest gains today. Heavy buying from Asia and Europe overnight helped provide the early support. The acceleration to the upside occurred as the Dollar weakened throughout the New York trading session. Financial stocks led most of the rally today.
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