Close: London Session | Forex, Metals, Oil, Agriculture March 25, 2021



Commodity experts at Marex Spectron estimate the 2021-22 global coffee deficit at around 10.7 million bags, compared with previous figures of approximately 8 million bags. Besides the creeping deficit set to materialize this year, coffee importers in the US have also dealt with a global shortage of shipping containers. less A coffee shortage appears to be brewing as global supplies could shift into a deficit as drought in Brazil slashes output. Source: Bloomberg In conjunction with adverse weather conditions in South America, lower inventories mean the coffee market will tighten and support higher prices.
less Over the past several months there have been spectacular rallies in numerous commodities, from copper to crude oil to soybeans. Logistical problems have been a significant issue for coffee exporters in South America. not simply buy soybeans and put them into one’s portfolio or store them in the garage. Over two decades ago Jay got his start at the Kansas City Board of Trade in the Wheat Futures pit.


The Dollar has been rising this whole year while just in the last month commodities have started to correct lower. Interestingly, the New Zealand dollar and the Australian dollar are back at the top of the leaderboard. The Dollar Index is at its best level since last November and is pushing above the 200-day moving average for the first time since last May. Surging coronavirus cases and a dip in US bond yields supported the safe-haven appeal of gold while a stronger US dollar weighed on the precious metal.
Easing US treasury yields provided support to the precious metal at lower levels while a strong dollar capped the rise. It had fallen alongside shares as sentiment soured in the previous session, which stoked haven demand for the US Dollar and thus undermined anti-fiat alternatives. less A discussion on the relationship between the US Dollar and commodities he sees playing out this year. It is true that the dollar has fallen against the yen in March for the past five years.
The dollar got a boost as UST yields rebounded from weekly lows as well as concerns about the economic impact of Covid-19 that continues to drag down Europe. Over the past 20 years, the dollar’s performance is evenly divided between gains and losses.


less Gold prices edged higher amid what looked like a retracement across a wide range of benchmark assets following the prior day’s risk-off fireworks. In global markets, gold prices were flat today amid mixed cues. Gold prices are trading down by 0.1% at Rs 44,805 per 10 grams. Gold prices in India struggled today amid mixed global cues. On MCX, gold futures for April delivery were flat at Rs 44,897 per 10 grams. Gold rallied after becoming very oversold and hitting important support at $1675-$1690, but it could retest that low or make a lower low before a sustained rebound begins.
One reason for the jump in platinum prices is that more investors are buying the metal as a cheaper alternative to gold to hedge against inflation. That might help underpin gold and crude oil as the haven USD buying lets up and energy demand hopes flicker, but follow-through probably needs a more meaningful catalyst. Spot gold was steady at US$ 1,734.8 per ounce.
In a way, these can become optionality plays because the ability to finance the project is leveraged to the Gold price.


The Suez Canal and Oil Analysis – Talking Points: The Suez Canal is among the top chokepoints for global oil trade, other key waterways include the Strait of Hormuz. Oil prices fell on revived worries about demand for oil products. Suncor, meanwhile, has focused its business on oil sands, one of the most energy-intensive and high-emitting forms of oil production. The EIA reported that U.S. crude oil refinery inputs jumped to an average of 14.4 million barrels per day.
Crude oil prices also recovered after hitting a one-month low in the prior session, with the front-month WTI contract erasing nearly all of the prior day’s losses.
But a pandemic-driven crash in oil prices last year pushed away investors from the shale industry, forcing companies to look at asset sales and mergers for survival. Although oil supply in Europe might be under threat due to the blockage of the Suez Canal, lower demand due to increasing coronavirus cases is limiting demand. Crude inventories rose by 1.9 million barrels in the week ended March 19 to 502.7 million barrels, compared with analysts’ expectations in a Reuters poll for a 272,000-barrel drop.
After the PMI report and the announcement of the blocking of the Suez Canal, oil prices rose sharply. Even the big oil companies that many had dismissed as dinosaurs have made significant moves higher in the first quarter of 2020.

United States

Nasdaq Futures are trading up 23 points (up 0.2%) while Dow Futures are trading up 91 points (up 0.3%) The rupee is trading at 72.60 against the US$. The Nasdaq, home to tech and many growth stocks, was down 2% Wednesday, lower for a second day, as Treasury yields also fell. But the effect on stock markets could hamper the Fed’s ability to tackle inflation, according to Diego Parrilla, fund manager at Quadriga Asset Managers in Madrid. “The market believes that inflation above target for a while will force the Fed to tighten early; the Fed disagrees,” he said.
Fed speak in focus as well as US GDP, jobless claims & PCE inflation data coming up. The data, released at 8:30 a.m. Eastern Time, is unlikely to change the wider outlook for the labor market or Fed policy. US stock futures are trading higher today, indicating a positive opening for Wall Street. Now, sellers are showing up even as the US economy is expected to boom this year, with growth slowdown in subsequent years.
Worth just $1.2 billion a year ago, Nasdaq-listed Futu Holdings Ltd. has surged in value and at its peak in February was worth nearly $26 billion. At its latest FOMC meeting, the Fed promised near-zero interest with no rate hikes until 2023, and its $120 billion monthly asset purchases see no sign of abating.


Popular Chinese actor Wang Yibo terminated his contract as a representative for Nike in response to social media criticism over the company’s Xinjiang statement, his agency said on Weibo. I recalled the eerily prescient (in a reverse kind of way) setup a few years ago: If Draghi was league MVP, the PBOC was its champion apparently. H&M, Nike face boycotts in China as Xinjiang becomes wedge issue.


EU countries have resumed the use of the Astra Zeneca vaccine following EMA’s conclusion that benefits of the vaccine still outweigh the risks. EU is set to put vaccine exports on hold for six weeks to prevent a larger net outflow of vaccines out the bloc. The EU and the UK kicked off talks to defuse tensions around vaccine distribution and released an initial statement in which they vowed to strive for a “win-win” situation. Within months, Mario Draghi’s ECB (June 2014) would start flailing with targeted LTRO’s and even negative interest rates (NIRP) – for reasons he never could adequately explain.
There was some good news on the vaccine front with the European Union and the U.K. signaling an easing of tensions over supplies. less “Win-win” –is how the EU and the UK have described their desired outcome from fresh negotiations on vaccine distribution. Separately, one of Britain s most influential business lobby groups said Brexit is causing major harm to many U.K. firms due to permanently higher trade costs.
It could be the Brexit trade negotiations all over again, but now it s vaccines that are the major source of contention between the London and Brussels.
Assuring an ongoing supply of doses is positive news, but progress hinges on calm at Thursday’s EU Summit. The exodus from Britain accelerated through the early months of 2021, even as net migration from countries outside the EU remained positive.