On March 2, the ICE market finally rebounded sharply after five consecutive negative days, and the panic among long funds and cotton traders subsided. According to CFTC statistics, the net long ratio of ICE cotton futures funds has fallen from 15.12% to 11.31% since late February and then stabilized and rebounded.
Some institutions and cotton-related companies believe that there are three main factors leading to the rebound of ICE: First, the U.S. financial, stock market and commodity futures markets have turned. Supported by the sharp increase in expectations for an interest rate cut by the Federal Reserve in March and the fact that the COVID-19 epidemic has not spread rapidly to the United States, the dollar index has fallen sharply, triggering a surge in commodities; secondly, in the face of the fierce COVID-19 epidemic, countries around the world have launched joint prevention and control measures. Coupled with the acceleration of vaccine research and development, market confidence has bottomed out; third, driven by ICE falling below 65 cents/pound and 62 cents/pound, global buyers have signed a large number of contracts to purchase 2019/20 and 2020/21 U.S. cotton, U.S. cotton exports are expected to surge (the number of ON-CALL price transactions is not low).
So does this mean that ICE has entered a continuous rebound or even a reversal rhythm? Industry insiders believe that there is a strong expectation that the main contract will return to 65 cents/pound or even 68 cents/pound. However, we must always be wary of the “late spring cold” market in cotton futures. The fluctuation range of ICE market may still be large, and the overall trend of oscillation and rebound is Established, it still takes time and space.
First, the COVID-19 epidemic has broken out globally. Following South Korea, Japan, Italy, and Iran, the prevention and control situation in European countries is becoming increasingly severe; of course, the biggest risk and “powder keg” are still It’s the United States;
Secondly, the benefits of central banks releasing liquidity to stimulate the economy by cutting interest rates are expected and digested by the market in advance, which has a negative impact on the financial, stock, bond and commodity futures markets. How long it can last is worthy of attention;
Thirdly, affected by the COVID-19 epidemic, the global and Chinese economies are facing great pressure to recover. According to the National Bureau of Statistics, in February 2020, China’s manufacturing purchasing managers index (PMI) was 35.7%, a decrease of 14.3 percentage points from the previous month; the non-manufacturing business activity index was 29.6%, a decrease of 24.5 percentage points from the previous month, indicating that The business activity index for the future shows that confidence in the next economic activity is still weak; during the same period, India’s PMI also dropped slightly from 55.3 in January to 54.5. </p
