Traders looking to track the commodity and currency relationships should follow the Commodity Research Bureau (CRB) Index. The CRB Index consists of a basket of commodities and provides a useful measure of potential inflationary pressure. When commodity prices rise, this price increase can spread into the economy by increasing the costs of production and goods. This inflationary tendency is closely watched by central banks. We can see in Figure 5.4 that at the end of 2006, the CRB Index showed a decreasing price trend due to a collapse in the energy price sector.
FIGURE 5.4 Reuters Commodity Index.
Source: www.ino.com.
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