Expectations for another record large short positioning in Arabica against a backdrop of cooler temperatures forecast in Brazil allowed for futures prices to ascend on Friday, having made new contract lows in the very same session. Whilst commercially led buy interest had been noted over the last few sessions, the aggressor of Fridays move is likely to have originated from speculative short covering and options gamma trading. Robusta also saw steady buying for Fridays session allowing futures to retrace approximately 50% of Thursdays technical break lower. Despite this recovery futures did manage to achieve a new contract low earlier in the earlier session printing $1610 basis Sep18. Conjecture for both markets observed a broad expectation that shorts were somewhat over extended basis their percentage of exposure to open interest.
Robusta spreads continue to command premiums as the market awaits to see how the July tender situation will be resolved, most hold expectations of increased Brazil grading’s, but the window for significant material to come to the board for Jul18 continues to shrink. The July /Sep subsequently broke higher printing +75. Sep/Nov continues to take heed of the nearby delivery month and is perhaps also somewhat steadied by the record short which is concentrated in the front month (assuming that this will have to be rolled or covered).
Weekend weather reports on Sunday called for Brazil coffee producing regions to remain dry and warm, but this week’s temperatures should start to trend slightly cooler. Vietnam, Indonesia and Colombia will continue to receive periodic precipitation and thunderstorms. Remnants of Tropical Storm Beryl will yield moderate showers in areas from Puerto Rico to Cuba early to mid-week this week.
From a macro perspective UK Brexit risk and trade war rhetoric has reared its head again this morning, following increased stress on British PM Theresa May. Oil prices rose on Monday as investors focused on tight market conditions after data late last week showed U.S. crude inventories fell to their lowest in more than three years. This rally appears to have shaken off worries that China could impose tariffs on US oil exports. The US Dollar was seen marginally weaker in early trade on Monday.
The BRL could see increased volatility from trade war tensions and political upheaval after initial reports that former president Lula da Silva was to be released from jail. This decision was however quashed by an appeals court on Sunday. In this Sunday afternoon ruling, Judge Pedro Gebran Neto overturned the shock order to free Lula.
Brazil judge blocks order to release of Lula from prison
BRASILIA (Reuters) - The chief justice of a Brazilian appeals court blocked another judge’s efforts to release imprisoned former president Luiz Inacio Lula da Silva on Sunday, in a legal battle over the country’s most popular politician ahead of an October election.
Polls suggest the leftist icon, who is in prison for bribery, could win a third term if he entered the race, but Brazilian electoral law forbids politicians from running for office within eight years of being found guilty of a crime.
Still, an electoral court may not issue a final ruling barring Lula from the presidential contest until next month, creating a cloud of uncertainty hanging over the campaign. Sunday’s legal back-and-forth may encourage supporters holding out hope that he can still return to unite Brazil’s left.
Appeals court judge Rogerio Favreto, who served in the Justice Ministry under Lula and was appointed by his handpicked successor, ruled earlier on Sunday that the former president should have the same conditions to campaign as other candidates.
However, the chief justice of the TRF-4 appeals court, Carlos Eduardo Thompson Flores, granted a request from prosecutors to keep Lula in prison, blocking Favreto’s ruling.
The former president is serving time for taking bribes from an engineering firm in return for help landing contracts with a state firm. He faces another six trials for other corruption allegations. Lula has denied any wrongdoing.
In polling scenarios including Lula in the race, he wins more than twice the support of his nearest challenger. When he is left out, a third of respondents say they would spoil their ballots or leave them blank.
hat has made it harder for leftist candidates such as former Ceara Governor Ciro Gomes to build momentum in a highly fragmented field.
Support for former Sao Paulo Mayor Fernando Haddad would more than triple with Lula’s backing, lifting him to second in the race, according to a survey last month.
Reporting by Lisandra Paraguassu and Ricardo Brito in Brasilia; Additional reporting by Eduardo Simoes and Ana Mano in Sao Paulo; Writing by Brad Haynes; Editing by Daniel Wallis and James Dalgleish
Our Standards:The Thomson Reuters Trust Principles.
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