After recently announcing a rate cut for the first time since the outbreak of the financial crisis, China announced a cut in its deposit rate by 0.25% to 3%. China also cut the benchmark lending rate by 31bps to 6% and it lowered the floor for lending rates to 70% of benchmark rates from 80% beforehand.
The announcement came at the same time as the rate decision by the Bank of England, that expanded QE by 50 billion pounds and boosted the pound. AUD/USD is on the rise. EUR/AUD is at the lowest since February 1989.
Update: the ECB cut the deposit rate to 0% and the benchmark rate to 0.75% – EUR/USD plunges and AUD/USD rally is limited.
However, EUR/AUD continues falling.
At first, some news agencies reported a cut also in the RRR – a report that was wrong. Nevertheless, more Chinese easing enables more Chinese demand for Australian goods, and this is certainly Aussie-positive.
China is probably undergoing a worse crisis that it admits: this is the second move in recent weeks, and it is supposed to keep growth above the official expectations of 7.5%. Q1 growth stood on 8.1%, but was doubted by many, that look at electricity, orders and additional independent indicators.
AUD/USD is at 1.0305 after reaching 1.0324 on the initial reaction. The last time it went so high was on May 2nd. The next level of resistance is at 1.04. The Aussie had a hard time breaking the 1.0230 level, but after making the move, it continues pushing higher.
For more on AUD, see the Aussie USD forecast.