Rising Dollar Pushes Commodities Down While China Drives Industrial Metals Up

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The US dollar rose 2.20% in July, primarily due to the Euro’s decline. A combination of weak economic news and falling Eurozone assets are having a negative impact on its common currency as well as European stocks. 

Dollar Etf_opt

US Dollar ETF rising in July

After a few months of flatness, the dollar made a big move, hitting a 6-month high. This surge had a negative impact on commodities. The CRB commodity index experienced a 5% decline in July, losing part of the ground gained this year.

CRB Commodities Index declining in July

CRB Commodities Index declining in July

A rising dollar has historically been bad for commodities and therefore this is also negative for industrial metals. However, industrial metals kept gaining ground this month thanks to stronger demand coming from China.

While global tensions (especially in Europe) made developed markets struggle, emerging markets had a very good month. Chinese stocks rose 10% in July, breaking out to the highest level in three years. The good news for China is very good for industrial metals as China is the biggest user of these commodities.

China iShares (FXI) hitting 3-year high

China iShares (FXI) hitting 3-year high

What This Means For Metal Buyers 

Industrial metals performed well in July thanks to positive news from China. However, commodities lost some ground to a rising dollar. A stronger dollar could have a depressing effect on industrial metal prices. The performance of industrial metals through the rest of the year will strongly depend on these two factors.

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