Morgan Stanley Coffee Report

Macro sentiment was decidedly improved overnight and coffee was an early beneficiary of the winds of change, as the low printed on the opening.  Brazil selling returned to the market in the more deferred months, while roasters began to cautiously dip their toes back in, having let coverage slip in recent sessions.  The sense that a sponsor is present emanated from various corners of the world, and a surprisingly large decrease in OI only drove further questions regarding current positioning.  Whether coincidental or otherwise, coffee and other AGS, notably sugar, charted a strikingly similar path in resurgent macro trading, and a bounce was notable at the time of DOE releases which proved to be an intraday bullish data point for crude. The post KC close FOMC  announcement of unchanged rates drove a sharp DXY selloff, and it appears the market is taking the comments in a slightly dovish manner.  The much-watched “dot plot” implies a single event hike path for 2016, with the steps now officially likely to extend into 2018.  With weather steady and short term certainty now in place with regards to the Fed, one expects focus to shift most imminently to the Brexit referendum and the economic impacts that are implied by either side of the decision.  Certainly many will quibble with the relevance to coffee price discovery of said event, however with the systems again proving their dominance of the market, it seems an event that may determine the short term price of coffee nonetheless.  Given the potential impact on currencies, it may in fact be a fundamental consideration, if only by the transitive property.