Understanding and measuring the relative roles of different causal channels between commodity prices and exchange rates has important implications in financial decision making, especially for market participants with short horizons. From a macroeconomic perspective, this can also be useful for interpreting exchange rate movements, financial market monitoring, and monetary policy.

As the US-China trade war is set to intensify, forex traders should take a closer look at commodity currencies. US President Trump announced that tariffs on the remaining Chinese imports into the country may be announced if no progress is achieved on the sidelines of the G-20 meeting in Buenos Aires, Argentina between November 30th and December 1st. This would levy tariffs on all Chinese exports to the US, valued over $500 billion per year. This is expected to have a much bigger negative impact on the global economy than many are prepared for.

Predicting the next move in the markets is the key to making money in trading, but putting this simple concept into action is much harder than it sounds. Currencies are moved by many factors - supply and demand, politics, interest rates, economic growth etc.

Have you heard the term commodity currencies?