Weekly Market Overview

Sugar

• Overview: The ICE 11 sugar price spiked in the early stages of last week after rumours of potential frosts in Brazil as well as rising gasoline prices. The prompt July 2022 contract traded from a low last Monday of 19.28 USc/lb to a high of 20.24 USc/lb on Tuesday and closed the week up 78 points at 19.95 USc/lb.
   
• Brazil: After three damaging frosts last year, it is understandable the market jumped at the news of a cold front moving through sugarcane areas last week, bringing the potential for damaging frosts. While no frost eventuated, it was a strong indicator for the market of another cold Brazilian harvest. There were also rumours that Petrobras was set to raise the price of gasoline last week, which would drive the ethanol parity higher. However nothing has yet been confirmed.
   
• India: The India Sugar Milling Association (ISMA) reported 646k tonnes of sugar was produced in the first two weeks of May, bringing the season-to-date total to 34.8 million tonnes (up 14.4% year on year). While 111 mills are still running into the second half of May at a strong pace, the monsoon season is fast approaching, indicating a possibility that not all cane will be able to be crushed this season. 
   
• Commitment of Traders (speculator activity): The latest Commitment of Traders Report revealed speculators increased their net long position by 37,000 lots, in line with the 47-point rise in the Jul22 contract. A 129,000 lot net long position was recorded against Tuesday 17 May 2022. 

Currency  

• Overview: The Australian Dollar (AUD) found some strength last week and traded its way back above 70 US cents after Australian wages data was not as grim as expected. The AUD traded from a low of 68.73 cents last Monday, up to a high of 70.74 US cents on Friday. 
   
• AUS Data: The Australian employment data provided few surprises for the market when the unemployment rate printed at 3.9% as expected, the lowest level since 1974, and another 4000 workers obtained jobs. The AUD retreated slightly when the Wages Price Index (see our Jargon Buster) rose slightly less than expected, at 0.7% quarter on quarter and 2.4% year on year, indicating a 25-basis-point rate rise by the RBA is likely to be all that is necessary in their next June meeting. 
   
• United States: Federal Open Market Committee (FOMC) Chairman Jerome Powell last week told The Wall Street Journal that  "restoring price stability is an unconditional need. It is something we have to do. There could be some pain involved." Markets interpreted these statements as a sign that the US cash rate is still a long way from reaching its terminal rate. US equities were one of the worst-hit asset classes from the news, with the S&P 500 sufferings its largest intraday decline since June 2020. 
   
• Global Inflation: The latest inflation data came out of the UK last week where headline inflation rose from 7.0% in March to 9.0%. The increase was primarily driven by the increase in household energy prices. 

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