European Commodities: What Do Falling Interest Rates in the EU Mean for Commodities?

Globe and Mail

4 days ago

European Commodity Winners This Week
Euro Buxl (GXM25), +1.89%
It is not frequent that the German bond tops the ranks of weekly commodity winners. However, this week, all European fixed income bonds are topping the list with bonds from the United Kingdom, France, and Italy following suit.
Market participants are increasingly betting on potential interest rate cuts by the European Central Bank (ECB). This speculation is driven by expectations of slowing economic growth and easing inflation pressures in the Eurozone. Long-duration bonds like the Buxl are particularly sensitive to interest rate changes. Buxl futures broke above key technical levels, including the 10, 20, and 50-day exponential moving averages. This technical breakout has attracted momentum. While not perfectly stable, statistical correlations between BUXL futures and key commodities like oil or copper often show negative short-term correlation, especially during rate-sensitive macroeconomic periods.
LME current copper stocks at 149,875 tons marked a significant decline from the high of 320,650 tons in September 2024. Statistically the current stock level is low, and when LME stocks are low, the price of copper futures tends to rise as manufacturers of wiring, electric vehicles, and other copper-intensive products may need to pay higher premiums to secure physical copper. Most technical signals point upwards, and prices are above the 10, 20 and 50 EMAs. Watch out for the 50 (9,345) EMA as this has been the key to sustain the current trend.
European Commodity Losers This Week
Cocoa #7 (CAU25), -7.77%
Cocoa contracts have shown a reversal candle pattern testing the 50 EMA on May 30. The downtrend then found a stop and now long traders are watching if the 10 and 20 EMAs will be broken. The current RSI around 50 is in neutral territory, so if this turnaround is sustained this week, then long traders will pay attention. However, the forward curve has a definite bearish bias with contracts in December 2025 trading at 5,985 and further down into 2026.
Fundamentally, early indications suggest a potentially poor mid-crop from major West African producers. A flat 10% tariff on all U.S. cocoa imports has been implemented, supporting prices. Demand is still resilient but reduced, with the ICCO reporting for 2025 Q1:
Europe: –3.7% (353,522 tons)
Asia: –3.44% (213,898 tons)
North America: –2.45% (110,278 tons)
The above figures are better than expected providing support to prices. However, it is clear that the peak reached around 10,600 will be hard to reach again in 2025 in the current context.
UK Natural Gas (NFN25), -6.91%
Early May experienced disruptions in Norwegian gas supplies due to maintenance, but flows recovered later in the month. The United Kingdom's gas storage capacity remains a concern. The Rough storage facility, accounting for about half of the UK's storage, has faced operational challenges.
European gas storage levels are approximately 47%, below the five-year average, which could influence UK gas prices in the short term.
The July gas contract is trading well below the 10, 20, and 50 EMAs showing a clear downtrend situation that began on February 13. The contract seems range bound (80-87) in the short term, leaving traders guessing the next move. Further in the forward curve, the Feb 2026 contract is pointing downward to 68. Most technical indicators (oscillators, moving average, and MACD) are flagging 'Sell.' If the contract drops further to 75 or breaks upwards of the 10 EMA, then the current trend could be over. For now, bears are in control.