ICE cotton eases due to selling pressure but rate cut caps losses

19 Sep '24

2 min read

ICE cotton eases due to selling pressure but rate cut caps losses

Pic: Adobe Stock

Insights

ICE cotton prices declined by over 2 per cent due to selling pressure, though a recent Fed rate cut helped limit losses.
Despite some recovery, prices remained weak as traders focused on the Fed meeting.
The market now awaits USDA's report for further direction.
Cotton prices are expected to stay between 69-73 cents, with open interest slightly down and futures contracts showing mixed movements.

ICE cotton declined further by more than 2 per cent due to selling pressure. However, the Fed's rate cut has capped the losses. While the rate cut helped US cotton see some recovery, it was not enough to keep prices in the green zone. The market remained focused on the Fed meeting. Now, traders are waiting for direction from the US cotton export sales report, due today.

Yesterday, the ICE cotton December contract settled at 71.27 cents per pound (0.453 kg), down by 0.89 cents. It continued its downward trend for the second consecutive trading session.

The US Federal Reserve announced a 0.5 per cent interest rate cut for the first time in four years, bringing the benchmark rate down to 4.75-5 per cent. Fed Chairman Jerome Powell stated that the US economy had been growing at a solid pace, with inflation under control and the job market remaining strong. Crude oil and the dollar index remained relatively stable, without any major triggers.

Traders said that despite a rise in prices, demand did not stabilise. There was selling pressure from cotton producers, which pulled down prices. Cotton prices are likely to remain within the range of 69-73 cents in the near future.

Total open interest in the cotton market stood at 235,001 contracts as of September 18, down by 1,688 contracts. However, it had increased by 7,125 contracts on Monday. ICE data released on September 17 showed that the deliverable No. 2 cotton futures contract inventory remained unchanged at 265 bales for two consecutive weeks.

The market's focus has now shifted to the US Department of Agriculture's (USDA) weekly export sales data, due on Thursday, which may provide more insights into the current demand scenario.

Currently, ICE cotton for December 2024 is trading at 71.49 cents per pound, up 0.22 cents. Cash cotton traded at 64.77 cents (down 0.89 cents), the October contract at 69.68 cents (down 1.13 cents), the March 2025 contract at 73.16 cents per pound (up 0.17 cents), the May 2025 contract at 74.35 cents (up 0.21 cents), and the July 2025 contract at 75.92 cents (up 0.16 cents). A few contracts remained at the same level as the last closing, with no trading noted today.

Fibre2Fashion News Desk (KUL)

More Textiles News - United States Of America...