ICE cotton futures staged a classic fund-driven rebound on June 25. The December contract touched a two-week low of 76.09 cents/lb before recovering to close at 76.97 cents/lb, up 0.71 cents or 0.93%. The bounce was fueled by a weaker dollar and speculative bargain buying, confirming that the 75-77 cent range remains a short-term floor. This price action underscores the market's heightened sensitivity to macro sentiment shifts.
Macro factors: weaker dollar and higher oil prices provide dual support
The rebound was most directly driven by currency dynamics. The US dollar index ended a three-day winning streak after softer-than-expected inflation data reduced expectations for a Fed rate hike this year. A weaker dollar makes dollar-denominated cotton cheaper for overseas buyers, restoring some confidence in export demand. Meanwhile, crude oil rose about 2% after a cargo ship was attacked near Oman, reigniting concerns about Middle East supply disruptions. Higher oil prices increase the production cost of polyester, strengthening cotton’s competitive edge against synthetic fibers and providing additional sentiment support for cotton prices.
Fund flows: technical repositioning dominates short-term moves
From a trading perspective, the rebound had clear technical correction characteristics. StoneX senior vice president Bailey McHenry noted that after heavy selling the previous session, speculative funds executed concentrated short covering, providing the main momentum for the bounce. The current price level (around 76 cents) is seen as a buying opportunity, with buyers willing to establish long positions. This suggests speculative funds are not bearish on trend but are seeking entry points on dips. For textile mills, this means sharp price swings may become the norm rather than the start of a one-way trend.
Fundamentals: export sales weaken but shipments recover
The USDA’s weekly export sales report provided another set of key signals. For the week ended 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 net sales were 67,089 bales, bringing the combined total to 150,953 bales. Although overall data was weak, export shipments reached 300,155 bales, up 20% week-on-week, including 12,248 bales to China. This indicates that previously signed contracts are being executed at an accelerated pace, and the supply chain is functioning normally. The sales slowdown reflects a temporary adjustment in new order pace rather than a fundamental demand collapse.
Spot market: index under pressure, spreads need repair
On the spot side, the Cotlook A index fell 250 points to 85.05 cents/lb, declining much faster than futures. This divergence suggests that downstream mills are still facing high actual procurement costs, and the futures rebound is more financially driven. For spinners relying on imported cotton, two variables deserve close attention: the RMB/USD exchange rate and the price gap between polyester staple fiber and cotton. If oil prices continue to rise and push up chemical fiber costs, cotton’s relative value will further improve, supporting spot transactions.