Aluminium Prices Are Expected to Continue to Rise as the Fed's Rate Cut Expectations Rise - Analysts Say Global Demand May Support the Commodity Market
11-15
According to the latest data from CME's FedWatch tool on November 13, the probability of the Fed cutting interest rates by 25 basis points in December this year reached 82.8%, while the probability of maintaining the current interest rate was only 17.2%. The increased expectations of rate cuts have a profound impact on global financial markets, especially the commodity market. At a time when the global macroeconomic outlook remains uncertain, the trend of Aluminium prices and other base metal prices has become the focus of market attention.
The Fed's rate cut may lead to a weakening of the US dollar, and Aluminium prices are supported
The rising expectations of the Fed's rate cuts mean that the pressure on the dollar to weaken is increasing. Usually, when the Fed enters a rate cut cycle, the attractiveness of the US dollar will decline, especially for investors seeking higher returns. A weaker dollar is often good for commodities denominated in US dollars, such as crude oil, copper and Aluminium, because these commodities are cheaper for non-US dollar holders, stimulating global demand.
Rate cuts increase market liquidity or bring funds to the commodity market
Rate cut policies usually increase market liquidity and ease financing pressures on companies and consumers. A looser credit environment can inject more funds into the market, stimulating consumption and investment. In the commodity market, increased liquidity is expected to trigger more capital inflows, and industrial metals represented by Aluminium may benefit from this.
In addition, the easing signal of interest rate cuts may prompt some investors to look for risky assets with higher returns. Commodities may be seen as investment options with return potential, thereby attracting funds to be injected into markets such as Aluminium.
Interest rate cuts help the global economic recovery, and the outlook for Aluminium demand has improved
The Fed's interest rate cut expectations are interpreted by the market as a signal of support for the global economic recovery. If the US economy gains momentum for recovery driven by interest rate cuts, the global economy may also benefit indirectly, thereby injecting confidence into the demand for industrial metals.
Aluminium is widely used in construction, transportation, aerospace and other fields, and is regarded as one of the barometers of industrial activity. If the United States and other major economies resume growth under monetary easing, Aluminium demand is expected to rise. In addition, in the automotive industry, the lightweight trend of electric vehicles has pushed up Aluminium consumption and also boosted the expected growth in Aluminium demand.
Aluminium prices will still face multiple variables in the future
Although the Fed's interest rate cut expectations support the rise in Aluminium prices, price fluctuations will also be affected by other factors. The balance of supply and demand in the global Aluminium market remains an important factor affecting prices. The supply chain recovery in some major Aluminium producing countries is still relatively slow, and the tightening of environmental protection policies has limited the Aluminium production capacity in some countries, and there is uncertainty in the supply side.
On the demand side, China, as the world's largest Aluminium consumer, has a certain inhibitory effect on Aluminium prices due to its slowing economic growth. However, the recent stable growth policies introduced by the Chinese government may ease the pressure of weak demand. The recovery of demand in the European market and the progress of supply chain recovery will also affect the fluctuation of Aluminium prices.
Overall: Expectations of interest rate cuts have increased, and Aluminium prices may continue to rise
In general, the Fed's expectations of interest rate cuts have provided positive support for Aluminium prices. Factors such as the weakening of the US dollar, improved liquidity, and increased signals of economic recovery have jointly promoted expectations of rising Aluminium prices. However, there are still many uncertainties in the market. Whether Aluminium prices can continue to rise still needs to pay close attention to the speed of global economic recovery, supply chain stability, and energy price fluctuations.