Sugar prices were higher to almost unchanged during the week, maintaining a 14 USc/lb handle. Some frost in CS Brazil growing regions, another Petrobras price change and an increase to taxes on gasoline and ethanol in Brazil highlighted market news. Despite strong concerns for frost in the centre-south region, the full extent of damage will take a few weeks to process. Petrobras increased gasoline and diesel prices by 1.4% and 0.2% each respectively. The Brazilian Government’s tax increases to ethanol and gasoline are expected to lift parity levels. However, difficult to measure until prices at the pump are impacted. This week we see the UNICA report for 1H July as a key market driver.
The AUD has sustained recent strength into higher ground over the last week, with a weaker USD and sentiment aiding its performance. Price action highlighted this week on the back of failed planning for a replacement for Obamacare, RBA meeting minutes, stronger local employment data and RBA speakers. The RBA July meeting minutes illustrated some optimism from the central bank, with mention of a neutral rate at 3.5% driving the AUD to 0.7924 highs. Upbeat employment numbers saw the AUD surge toward USD 0.80, but fall just short at USD 0.7992. Deputy RBA Governor Debelle played down mention of a higher neutral rate and a rate hike in the near future. The AUD was sold off, finishing the week on the backfoot near USD 0.79. Looking ahead, we have the FOMC meeting, consumer confidence and GDP headlining economic releases, while the local unit will look to watch Q2 CPI and PPI for further price direction.
|Chart Sources: Bloomberg