Despite Russia and Ukraine entering the third round of cease-fire talks on Monday afternoon, signs of progress are absent after earlier agreements allowing civilians to flee the fighting failed.
The situation is still very uncertain, leading to higher volatility and weighing on most stock markets, with European and American indices ending yesterday’s session lower.
On the other hand, many commodities are seeing their prices soar, galvanized by the Russian/Ukrainian war, as supply coming from that part of the world is compromised by the military conflict.
Oil price jumped to over $135 a barrel
The price of Brent crude oil is hovering around $123 per barrel at the time of writing after peaking at over $135 per barrel – close to its all-time high of $147.50 per barrel reached in 2008, with the prospect of a possible ban on oil imports from Russia.
Gold reached the $2,000 mark
Growing uncertainty and worries about the economic consequences of the conflict in Ukraine, as well as the spectrum of inflationary pressures due to the rise in energy and agricultural commodities, are triggering investors’ “safe-to-quality mode”. The risk-off sentiment has pushed them towards safe-haven assets such as Gold.
Other commodities are spiking
Several agricultural and industrial commodities also rose sharply on Monday, such as:
- European natural gas, which gained 60% on Monday, reached an all-time high, at €345 per megawatt-hour – that’s equivalent to oil prices of $600 per barrel.
- Nickel surged as much as 62% on Monday above $40,000 a ton – its largest daily dollar gain in 35 years.
- Wheat reached record-highs are €345 a ton.
- Coal hit its all-time high of over $4050 per ton.
- Aluminum, Copper, and Palladium, all touched all-time highs at over $4,000 per ton, $10,845 per ton, and $3,442 per ounce respectively.
Rising commodities add pressure on already rising inflation
Because energy and food are a big part of how inflation is measured, the recent rise of energy and other agricultural raw materials are definitely adding more pressure to the current, already inflationary macroeconomic environment.
When this surge is passed on to final prices, it lowers the purchasing power of producers and consumers, which tends to impact their saving, spending, and investing decisions.
As central banks usually have a goal of price stability (with inflation around 2% in most cases), current rising inflation figures in most economies are showing worrying signs for growth prospects, which has pushed most central banks to raise their interest rates.
Such monetary policy trajectories impact all asset classes, triggering trading opportunities you can take advantage of.
What to watch out for now?
- The Dollar index is hovering near its highest level since May 2020 at around 99.30.
- The EUR/USD currency pair is at its lowest level since May 2020 around $1.086.
- The USD/CAD consolidates near a key level around CAD1.2808.
- European and Japanese GDP figures.
- American and Canadian trade balances.
- EIA Short-Term Energy Outlook.
- RBA Governor speak.
- ECB meeting.
