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Perspective: Morning Commentary for November 11

By: Arlan Suderman, Chief Commodities Economist

Perspective: Morning Commentary
 
Matt Zeller
Senior Market Analyst
Matt.Zeller@StoneX.com

November 11 – the U.S. dollar is on track for its largest two-day decline in nearly 14 years, after its largest single-day drop since 2015 yesterday; the “optimistic” CPI data yesterday showing “only” a +7.7% year-over-year inflation figure for October has the trade looking forward to the economy turning the corner. Fed language from the most recent meeting suggests the central bank is loathe to alter its course too soon, but optimism reigns regardless. The Dow Jones Industrials are looking to follow through on yesterday’s rally, its largest single-session gain post-pandemic, with record highs from early in this calendar year not that far off…

 

China announced changes to their COVID policies this morning despite rapidly rising case numbers, following President Xi Jinping’s meeting with a newly-elected Standing Committee last night; they are scrapping the “circuit-breaker” policy that suspend inbound flights to China carrying COVID-positive passengers, as well as reducing the number of tests required by international visitors from two to one, and reducing the quarantine upon arrival from seven to five days. Quarantines for citizens with close contact were also reduced, along with government reporting of said cases. The country reported over 10,500 cases yesterday, the largest single-day number since April when Shanghai was shut down, but public fatigue is setting in with more than two and a half years gone since the start of the pandemic. China’s economy is feeling the effects as well, more importantly to the government.

 

Commodities are taking advantage of the dollar plunge with key driver WTI crude oil up around $2.50 per barrel as of the time of this writing, thanks to optimism over better economic activity in China as well as a rash of global supply concerns. Similar factors are bleeding over into the grain complex, particularly soybean oil and soybeans, which are leading a rebound there this morning. Short and long-term concerns abound there regarding exports, eased at least somewhat today thanks to that weaker greenback and potential Chinese demand, but prices for U.S. exports remain quite elevated in comparison to cheaper global supplies. The U.S. needs to secure some soybean sales to China before the Brazilian crop hits the ports – the 2022/23 crop there is developing nicely and looks to be a monster, and China will be happy to snap up as much of it as it can when those supplies come online.

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