Raw sugar futures rallied in the run up to the October 19 expiry and continued to strengthen afterwards, before losing momentum and giving back two weeks’ worth of gains. While the fundamentals continue to take a back seat, price action was largely driven by market technicals. Non-index fund action has been a highlight through the last month, with the net short position blowing out to a record 226,000 lots. As the market has taken a reprieve, specs have moved back toward 140,000 lots net short position. Prices have traded freely with the October 19 contract off the board. Indian sugar is still expected to hit the global market through Q1–Q2 2020, however prices will need to move back into the 13–14 USc/lb range to incentivise exports from the region. Smaller northern hemisphere crops will be key in whether we will see Indian sugar on the global market.
An uninspiring month for the AUD, which gave up prior gains that had seen the dollar climb back up to USD 0.69. The RBA continued to ratchet up easing expectations by cutting interest rates to a record 0.75%. The accompanying commentary was the real kicker for the market, with the RBA Board indicating its intention to conduct policy that will help achieve full employment and reach the inflation target. The market was quick to price a fifty per cent chance of a rate cut at the RBA’s infamous November meeting, which is held on the same day as the Melbourne Cup and is sometimes used to surprise the market while attention is focused on the headline act at Flemington Racecourse. Looking ahead, US and China trade discussions remain at the forefront of AUD drivers in the near term, with key leaders and representatives from each country meeting this week. Positive developments will see a push back toward the key USD 0.69 level, last seen in September.