World Meteorological Organization declares onset of El Niño. What it means

<p>A new update from the World Meteorological Organization forecasts that there is a 90% probability of the El Niño event continuing during the second half of 2023.</p><p>This is no surprise as the US National Weather Service declared that El Niño had arrived last month.</p><p>The question now is the intensity and the effects. The WMO says it will be at least of a moderate strength others warn it could be particular strong because of high ocean temperatures.</p><p>The effects in markets are generally:</p><ul><li>Bullish for agricultural commodities due to drought risk</li><li>Sugar spiked during the previous El Niño</li><li>El Niño coincides with strong Pacific hurricane seasons but weaker hurricane seasons in the Atlantic, which could spare oil production</li><li>Generally warmer US winter weather, which is bearish for natural gas</li></ul><p>In 2015, the IMF <a href="https://www.imf.org/external/pubs/ft/wp/2015/wp1589.pdf" target="_blank" rel="nofollow">wrote a paper</a> on the macro effects of El Niño and concluded:</p><blockquote>While Australia, Chile, Indonesia, India,
Japan, New Zealand and South Africa face a short-lived fall in economic activity in response to
an El Niño shock, for other countries (including the United States and European region), an El
Niño occurrence has a growth-enhancing effect. Furthermore, most countries in our sample
experience short-run inflationary pressures as both energy and non-fuel commodity prices
increase. Given these findings, macroeconomic policy formulation should take into
consideration the likelihood and effects of El Niño weather episodes.</blockquote><p>The last El Niño period was 2014-2016.</p>

This article was written by Adam Button at www.forexlive.com.