Southern Aurora Markets partner Mike Avery.

“Even if you are on the right track you’ll get run over if you just sit there” – Will Rodgers

IT is difficult to find a more erratic week on the global markets than what we have gone through this week.

What is more difficult is figuring out what will happen next.

Analysis of the spot market would have you think much to do about nothing. All wool indices rose about 1 percent for the week, holding well when compared to the financial markets.

This seemingly positive path was against a backdrop of a weak Aussie dollar that sat at US63 cents when the spot auction closed last week, but opened at US60 cents for the opening Tuesday. That U5 percent drop in currency delivered only a 2pc lift Tuesday of which half was given back Wednesday. All this uncertainty had been created by “Liberation Day” – the impost of wide-ranging tariffs by the United States against its trading partners.

As global markets continued to weaken, the US Government announced a 90-day pause on tariffs — sometimes when you’re on the edge of a cliff a step back can be a positive move. This pause bolstered financial currency markets.

So, what does this mean for the wool market and forwards? With the US/AUD exchange rate approaching US63 cents again, the buffering effect of the weak Aussie will make life a little harder for the prompt market. Tight supply and improved sentiment may mitigate this a bit, but we are likely to be in for a bumpy ride. Unfortunately, it is difficult to see the impulsive and arbitrary nature of the decision making in the halls of power that externally influence the market changing in the near future.

The US imposition of a 145pc tariff on Chinese imports will disrupt trade and consumer confidence in the Chinese domestic market. The government will look to different trading pathways and will embark on stimulus measures to help consumers.

The current landscape brings to light the need for and importance of a liquid forward market, something that has been lacking in recent times. Both buyer and seller need to put some certainty into their businesses in these testing times.

Trades this week

20 micron April                                                  1500 cents                                           10 tonnes

21 micron September                                        1475 cents                                           10 tonnes

21 micron October                                             1475 cents                                           10 tonnes

21 micron November                                        1465 cents                                              5 tonnes

Total 35 tonnes

Source – Southern Aurora Markets.