SUGAR UPDATE

On light volumes sugar has pushed back towards the top of the range. In a macro sense very little seems to have changed to be driving this move higher. The net spec position has pushed long an additional 50k for the week and now stands at +100k. On the positive side, USD/BRL has fallen away to 3.58 with BRL shorts being covered into the potential for the impeachment of the President. There was some market talk around suggesting 75% of the upcoming crop has already been priced, taking away some of the usual bullishness of the currency move. The forward curve is still very supportive for Brazilian producers so watching producer access to credit is very important.

Technically, basis May, a break of 15.40 looks positive, although remembering the March contract peaked in the high 15c area, producer selling in front of 16c would make sense. There is patchy rain due in Brazil this week and India is forecast to be hot and dry (on the margin both of these are mildly bullish. In front of what appears to be a 620 mmmt crop, trading this sort of weather event is fraught with danger without further evidence of its disruption to harvesting.

CURRENCY / MACRO COMMENTS :

Both Draghi and Wheeler threw the market a curve ball on Thursday. The ECB cutting rates into deeper negative territory and expanding asset purchases. Unfortunately, he then suggested the move would be the last in the series and this caused an outsized and opposite reaction to what he would have been hoping for with EUR reversing higher. The RBNZ also cited lower inflation expectations cutting rates in a surprise move. Both of these moves caused large positioning changes against both USD and also for AUD/NZD. Technically, AUD looks constructive, a false breakout on Friday morning turned higher and if the currency can hold the break of 0.7500, then a move to 0.7840 is on the cards with the possibility of 0.8100. The key piece of data this week is the unemployment lottery on Thursday.

The FOMC meets this week, and whilst the data has been strong enough for them to consider hiking rates again, the market is expecting the Fed to outline the case for a June hike. This should be USD supportive.