Macro sentiment and fund repositioning drove a V-shaped reversal in ICE cotton futures on June 25. The December contract hit a two-week low of 76.09 cents/lb in early trading before rebounding sharply on a weaker dollar and bargain buying, settling 0.71 cents higher at 76.97 cents/lb, up 0.93%.
Weaker Dollar and Higher Oil Provide Short-Term Support
The dollar index ended a three-day winning streak after U.S. inflation data came in below expectations, dampening bets on a Fed rate hike this year. A weaker dollar makes U.S. cotton more affordable for overseas buyers. Meanwhile, crude oil rose over 2% on renewed Middle East tensions after a vessel was attacked near Oman, raising concerns about shipping disruptions through the Strait of Hormuz. Higher oil prices boost polyester costs, indirectly improving cotton's competitiveness as a textile raw material.
Export Data Reveals Weak Demand
However, the USDA's weekly export sales report painted a less optimistic picture. For the week ending June 18, current-crop net sales were 83,864 bales, down 53% from the previous week and 61% below the four-week average. Next-crop sales stood at 67,089 bales. Shipments totaled 300,155 bales, up 20% week-on-week but still 16% below the four-week average, with only 12,248 bales shipped to China. These figures suggest that despite lower prices, mill buying interest remains tepid, reflecting sluggish global textile demand.
Industry Impact: Rally Sustainability in Doubt
The rebound appears more technical and macro-driven than fundamental. StoneX noted that speculative funds covered short positions after yesterday's sell-off, with strong support around 76 cents/lb. However, U.S. cotton inventories remain ample, new-crop weather conditions are normal, and major importers like China are slowing purchases. For domestic textile mills, the near-term impact on import costs is limited; the key remains whether downstream orders can recover sustainably.