What factors affect the short-term and mid-term ICE trends?

Data released by the U.S. Department of Commerce showed that new manufacturing orders increased by 2% month-on-month in June, higher than the revised 1.8% in May; the Institute for…

Data released by the U.S. Department of Commerce showed that new manufacturing orders increased by 2% month-on-month in June, higher than the revised 1.8% in May; the Institute for Supply Management said that the service industry activity index rose to 56.7 in July, the highest level since April. highest level.

Higher-than-expected economic data boosted market confidence and alleviated external concerns about recession. On Wednesday, the three major U.S. stock indexes all rose by more than 1% (of which the Nasdaq rose 2.59%); however, crude oil futures plummeted (WTI crude oil front-month contract fell 3.98%). %), Chicago wheat and soybean futures fell significantly (closing declines were 1.42% and 1.21% respectively), and concerns about global cotton consumption continuing to peak and fall were rising. ICE cotton futures fell below 95 cents/pound during the session, and there will be more The empty stalemate and gambling compartment have moved down to 90-95 cents/pound.

Some international cotton merchants and trading companies judge that August will enter a vacuum period for the Federal Reserve to raise interest rates, and the room for adjustment of U.S. cotton fundamentals is relatively limited (the speculation that the high temperature and drought in Texas caused a sharp decline in the abandonment rate is coming to an end), coupled with the geopolitical tensions. With the situation eased and the external market oscillating, it is expected that the oscillation amplitude of ICE cotton futures will narrow significantly, and both long and short parties may enter a short-term weak balance range.

So what are the short-term and mid-term factors that affect the trend of ICE? The author summarizes the following points:

First, will the Fed raise interest rates by 50 basis points or 75 basis points in September? Since this week, Federal Reserve officials have been “hawkish” to express their determination to curb high inflation. However, as the U.S. economy slips into a technical recession and labor market fatigue emerges, the Federal Reserve may have to slow down its aggressive interest rate hikes and turn dovish. , a 50 basis point interest rate hike in September would be more reasonable and effective.

Second, Chicago wheat, corn and other futures continue to decline, and there is a high probability of returning to normal. With the signing of the Black Sea grain transportation agreement, the performance of the main grain-producing areas in the United States is acceptable, global liquidity continues to tighten, and the U.S. dollar strengthens, international capital has turned from bullish to bearish, and it is difficult for grain futures to form an effective rebound.

Third, the recent decline in global cotton consumption is relatively obvious, and recovery may take a long time. Since 2022, not only cotton textile and apparel companies in China, India, Pakistan and other countries have suffered from high cotton prices, inflation, declining orders, etc., recently, the concerns of domestic textile companies in Vietnam, Bangladesh and other countries about insufficient orders and declining production and sales rates have also increased significantly. ; Moreover, the Federal Reserve’s continued aggressive interest rate hikes and the comprehensive escalation of the Xinjiang cotton import ban have an increasingly prominent impact on the textile and clothing exports of China and Southeast Asian countries.

Fourth, the interest rate hikes by the Federal Reserve and the European Central Bank have resulted in greater pressure on the currencies of emerging economies to depreciate against the US dollar (such as the Indian rupee, Vietnamese dong, etc.). Some textile and clothing export companies are faced with high costs, low prices, and low profits.

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Author: clsrich