SUGAR MARKET OVERVIEW
October sugar broke through 16c last week and has been unable to recapture this level. Even after a UNICA downgrade to the Brazilian crop (546 mt), the prices remain under pressure. Excess stocks in Thailand and benign weather in Brazil and India is weighing on prices. For the first time in a while, there are some positives on the radar. Prices have moved low enough to be facilitating trade, Brazilian producers have been seen washing out of some sugar sales to switch to ethanol and there is some potential crop damage in UP India following flooding. None of this, however, really aﬀects the October contract with the ‘Thai Poison Pill’ hanging over the market. The October/March spread has weakened to –200 and barring a continued short squeeze from the Spec community further weakness is expected. This weakness will allow producers to ‘kick the can down the road’ further although with the beginning of the Thai crush around the corner it’s not sure how much can be rolled forward.
CURRENCY MARKET OVERVIEW
The AUD continues to trade within a 9200–9500 range with very low volatility. Following a neutral(ish) speech from Yellen and a dovish speech from Draghi, EURUSD has weakened. In fact, the USD has strengthened across the board (see chart below). AUD/USD has been caught in the crosswinds a bit, with EUR/AUD buying and AUD/NZD buying holding the range for the time being. Suspected intervention (smoothing) from the RBNZ was witnessed on Monday morning. Iron ore has broken down for fresh lows ($88.90) and Gold is holding under 1300 ($1280). All of this suggests the USD buying can continue and AUD/USD will move lower in the near term to play catch up. Working against this is a positive mood in the equity markets with the SPX posting its first close over 2000.