Sideways, choppy trading remained in force for another week in the sugar market. Directionally, sugar is still struggling with conflicting drivers; negative short term and supportive longer term. News released during the week did little to help that situation, with UNICA forecasting the CS-Brazil crop at 580 mmt (expected) but with a sugar make of 32.5mmt (below expectations), but with the Indian Meteorological Department forecasting the coming Monsoon to be only ‘slightly below’ average, against expectations of ‘well below’ average. The UNICA report saw prices rally ~2%, and the Indian report saw prices drop ~1.5%. Neither was enough to see us break the recent range of prices we have been enduring of 16.50–18.50 USc/lb since late February. With Friday night’s close last week, we are almost exactly in the middle of that range. Some talk has emerged that we could see an increase in the ethanol inclusion rate in Brazil from 25% to 27.5%, however the Brazilian Finance Minister threw cold water on that possibility on Friday night, stating “this is not the time”.
The AUD finally came back off last week with data released showing CPI had not risen as high as most expected. This has been perceived by the market to have given the RBA a reprieve from raising interest rates anytime soon. This in turn saw the Aussie being sold off, all the way down to 0.9252. The AUD is now almost 2 cents off the highs reached earlier this month. Investors have now built up a net long position in the AUD as well, which some commentators are calling ‘vulnerable’ to any negative news on the local economy. The situation in the Ukraine remains volatile and seems to be getting worse. Despite this, demand for USD has not strengthened.
This week we have NAB Business Survey data for Q1, which will give a good indication of business sentiment and conditions here.