The Commodity Bloc was volatile Thursday. Influencing the Canadian, Australian and New Zealand dollars equally was a sharp drop in key raw material prices. The Reuters/Jeffries CRB Commodity Price Index dropped 1.9 percent with notable contributions from industrial metals, agriculturals and the energy complex alike.
A particular driver for the loonie and Aussie dollar though was the pull back in crude from $120.50/barrel to below $116 after the IEA chief said he would release strategic reserves in the US should Tropical Storm Gustav disrupt production in the Gulf of Mexico. As a market driver, oil’s volatility was certainly a headliner; but it wasn’t the only influence for the commodity bloc. From Australia, event risk traders were taking in the business investment report for the second quarter and the Conference Board’s leading economic index. The private investment gauge doubled expectations with its jump, but the growth forecast in the composite was more interesting. Forecasting a decline in growth for a fifth consecutive month, this data certainly supports expectations of a 25bp rate cut from the RBA next week. Out of Canada, the 2Q current account balance came up short thanks to a drop in investment income flows. Looking ahead to tomorrow, the Canadian docket will offer the top event risk for the day with a second quarter GDP number.