As markets wound down for the last week of 2016, raw sugar futures surged higher on concerns over a potentially disappointing Indian harvest. Prompt March-17 managed a 150 point bounce in 3 days as prices tracked toward the key 20 cent level. The latest Commitment of Traders report supported the markets constructive sentiment, specs showing a mere 1,000 lot reduction to 132,000 net longs. UNICA released their figures for 1H December as expected. Production looks set to finish at 35.5 million tons of sugar. With the Brazilian crop mostly completed, market focus shifts to Indian and Thai crops. In Thailand, a delayed start to the crop has analysts in disbelief that this will affect final production for the year. In India, the recent crop reduction estimate has many speculating how much will in turn be imported? It remains too soon to make these assumptions, however we believe many will position themselves accordingly if so.
CURRENCY / MACRO COMMENTS :
All reports for a quiet last week of the year were washed out by a rampant EUR on Friday afternoon. The AUD spiked toward 0.7250 before retracting all gains near market close. There was little to point the finger at, other than profit taking and some position tuning in to year end. Given the desert feel to markets last week, there remains little to discuss.
Our focus shifts to the week ahead and market drivers. This week we see the FOMC December meeting minutes with US and local trade balances as key market indicators. Following the FOMC’s unexpected hawkish commentary and dot plot revisions, the meeting minutes will be key for the 2 expected rate hikes this year. US trade balances will also be kept under watch as expectations for Trump’s proposed trade restrictions may begin to take affect.