The Aussie Dollar rallied overnight almost a full cent to back over 0.97USC on the fact that weak US manufacturing data made traders think again about the Fed tapering QE. We are seeing a strange scenario where negative economic data is actually positive for US equity markets and bullish for our dollar against the greenback as it should see QE support continue. All eyes will be on the RBA rate decision today at 2:30pm where the consensus is that rates will remain on hold. A surprise cut should see the Aussie fall sharply which will be good for Australian exporters.
A softer US dollar is generally positive for dollar-denominated commodity futures values as they become more affordable as exports, however the resulting higher AUD value usually limit gains domestically. The cotton market had the largest move overnight, reversing 9 straight sessions of losses to gain 226 points, closing at 84.32 USc/lb on the December contract. Support in the cotton market has come from improved data coming out of China, while the State buying reserve continues to underpin the market. Production in the US are also coming to the fore, with heavy rains likely to reduce production in the high yielding Delta region. Wheat also made slight gains of 3 USc to close at 708 USc/bu, despite improving growing conditions in Europe, the Black Sea region along with Australia, while corn lost 5.5 SUc to drop to 656.5 USc/bu, resulting from weak demand for old crop stocks and conditions looking better for a large new crop.
Domestically, decent rainfalls were seen across large areas of NSW and QLD, with the largest falls coming down in the South of NSW which managed to clock up a couple of inches. There was increased planting activity over the last week in anticipation of falls, and expect things to pick up again once the ground dries out. New crop wheat continues to maintain respectable levels in the mid $280s track, and is struggling to push above $290 over the last few weeks. Other new crop numbers of note are canola, which has seen an impressive rise over the last few weeks to be posting numbers above $570 Newcastle track, while we have seen bids for faba beans at $340 ex farm Narrabri area for No. 2 grade or better. Old crop stocks continue to be in strong demand wherever they can be found. We also have homes for sorghum which is coming off with borderline moisture, with recent prices in to Narrabri offering a $5 discount for moisture up to 14.5%.