On March 7, ICE cotton futures opened lower as traders awaited the release of USDA supply and demand data on Wednesday and the weekly U.S. cotton export report on Thursday. In addition, Federal Reserve Chairman Powell’s speech to Congress is also extremely important.
On Tuesday, Federal Reserve Chairman Jerome Powell provided testimony before the Senate Banking Committee on why raising interest rates will take so long. He said that given the recent strong economic data, interest rates may be raised more than previously expected, and warned that there is still a long way to go to get the inflation rate back to 2%, and that U.S. dollar interest rates will continue to remain low for some time. rise. Powell’s words put the idea of a full-scale U.S. economic recession on a fast track. In short, Powell’s hawkish speech was very positive for the U.S. dollar index, and the U.S. dollar surged sharply that day.
Affected by the surge in the US dollar, ICE cotton futures fell sharply again, and US stock markets and oil prices also plummeted. International oil prices fell by more than 2.5 US dollars per barrel, and energy products collectively fell. A stronger dollar typically reduces demand for dollar-denominated oil from buyers paying in other currencies. Further pressure on energy comes from a contraction in Chinese trade, including lower crude oil imports.
The Cotton Association of India reported that cotton production this year fell to a 10-year low of 30.7 million bales. As a result, India has begun to shift from a major exporter to an importer. The market will focus on Wednesday’s USDA supply and demand forecast. According to the survey, analysts expect U.S. ending stocks to average 4.26 million bales this month, with forecasts ranging from 4.05 million to 4.5 million bales, compared with 4.3 million bales in February. Global ending stocks are expected to be 89.07 million bales, compared with 89.08 million bales last month.
This Friday’s employment data will determine whether the Fed will raise interest rates by 25 basis points or 50 basis points. The market expects that the United States added 213,000 new jobs last month, compared with 517,000 the previous month, and the unemployment rate was 3.5%.
Jon Marcus, president of Chicago brokerage Lakefront Futures and Options, said cotton’s move today was entirely based on a knee-jerk reaction to the dollar. If U.S. cotton exports are strong, the market will rebound sharply. In addition, the USDA planting intention report released on March 31 will also be a key factor, and cotton prices will fluctuate between 80-88 cents.