A remarkably weak month for raw sugar futures as prompt May-17 fell 230 points (18.50 – 16.12 USc/lb). Spreads have been savaged as the sharp fall in flat price reflects a market moving back into surplus. The weakening spreads have also contributed to the large speculative exit as it remains too expensive for investors to roll positions down the board. As Brazil begins their harvest, we expect ethanol prices to dip on the natural increase in supply. Anhydrous ethanol parity just below 15 cents may raise concerns if the market continues to fall. General consensus caught short as India approved 500 kmt of duty free raw imports overnight. Knee jerk reactions in markets were retraced as questions on implications and treatment of this announcement muddied waters. Technically, the market looks oversold. Possible sideways action with any forward momentum rejected near 18 cents.
A choppy month for the AUD, testing 0.7750 following the FOMC rate hike. Expected by market participants, accompanying commentary was less hawkish, continuing to stress the gradual nature of rate hikes. AUD buoyancy began to slip with hawkish minutes from the RBA meeting and speculation the US healthcare would be passed, seeing the AUD back below 76 cents. Since, the AUD has continued to move further south posting fresh 1 month lows near 75. This week the RBA left rates on hold reinforcing their neutral stance and concerns over the domestic housing market. The USD remains supported following the FOMC minutes which flagged plans to reduce balance sheet size. US Non-Farm Payrolls will be the next test for the USD.