The People’s Bank of China doesn’t stay behind the ECB’s dovishness: a rate cut of 25 basis points was announced. The new one year lending rate is 4.35%. This comes to mitigate the slowdown, and despite better than expected GDP figures earlier this week.
AUD/USD is ticking up, getting closer to 0.73. The move was not totally unexpected, but the timing, as always with China, was certainly not predicted. Chinese stimulus is supportive of the Australian economy that is still dependent on China importing Australia’s metal exports.
Update: the move doesn’t last – the US dollar is raging across the board and no currency is spared. It seems that there is a negative mood now taking over markets.
The authorities in Beijing introduces a slew of measures: apart from cutting the main lending rate, they set the deposit rate at 1.50%, also a 25bp cut. In addition, the RRR was also dropped: this means that Chinese banks can now lend out more money for less cash they have in their coffers.
Here is how it looks on the AUD/USD chart. The pair broke below uptrend support on the commodity currency sell off early in the week. Thanks to Draghi’s move, the mood in markets has improved and the Aussie enjoyed a recovery. It battled the post Fed high of 0.7280 and now continues advancing.
more coming
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