The US dollar was clearly losing after the last FED meeting, where projections for interest rate increases were lowered. The scale of the weakening was quite surprising because the market expected it to happen anyway. The discount did not last long and the current week is now in the dollar. Also in the following periods we can expect the strength of the American currency. This means one sale for the raw material market.

Since the beginning of the year, several factors have emerged that have adversely affected the quotations of the world's major currency. Market anxiety, fears for global economic growth, weaker data from the USA and, moreover, FED pigeons. An adjustment was therefore warranted but, on the other hand, there is no reason to reverse the upward trend of the dollar for the time being. The dollar will remain strong anyway, even if there are more small blows on it. All because of the fact that, for the time being, the currency market is in vain to look for any alternative. The United States is the only developed economy that is in the process of normalizing monetary policy. All other banks are at best neutral and, in most cases, simply continue to loosen monetary policy. Looking at it this way, every dollar revaluation should be considered as an adjustment. There is little evidence that this will change in the near future.

Prices of raw materials on the world's dance floors are expressed in the US dollar, so the stronger the dollar, the cheaper we buy individual raw materials. Only since the beginning of the week, copper has already lost more than 3%, gold has lost almost the same amount and oil has been slightly less overestimated. Of course, the drops in raw material prices are not only influenced by the dollar's quotations, but in the long run the correlation between the rising dollar index and falling raw material prices is almost perfect.

As for the raw materials themselves, this short-term rebound does not yet mean a change in trend. Demand for copper is already quite stable, but its dynamic growth is not yet to be expected in the context of China's economic slowdown, so the same applies to prices of this raw material. The rise in gold prices this year is due almost exclusively to speculative demand, not to greater demand from the jewellery or general industry. As for the oil prices, the hole may be over, but WTI's quotes should end at a maximum of around $50, because at this price the supply from the US can start to grow again.

Author: Mateusz Adamkiewicz, Financial Market Analyst at HFT Brokers