Recession fears in the U.S. led to huge drop across commodity prices overnight.
Thanks kindly to the ausbiz Twitterati for the charts and inspiration (via Bloomberg and Kitco):
This led the second largest ever daily decline for the Bloomberg commodities index on Tuesday (h/t @Scutty).
And there has been no let up today either.
You can pick your own favourite forward-looking indicator - 'Doctor' Copper was a traditionally popular choice - but they all look a bit the same at the moment.
Arguably one the most important trajectories will be that of the oil price, given it plays such a significant part in inflation dynamics.
You can sort of choose your own adventure here, with analysts variously warning of an alarming spike on supply shocks to $380 (JP Morgan), or a collapse to $65 (Citi) as global demand is crunched.
Quite a range of views, then!
But the recent price action has at least been encouraging.
Market-based inflation expectations have dropped from 3.5 per cent to 2.5 per cent very quickly.
And the 5-year forward inflation rate in the U.S. have now actually dropped below the 2 per cent target.
The relevance for us in Australia?
I guess this is a strong move in favour of inflationary pressures being transitory.
And although inevitably markets are expecting interest rates to rise here in 2022, there are now cuts being tentatively factored in for 2023.
