PBoC cut rates

<p>The market is digesting a cut in the reserve requirement ratio by the People’s Bank of China that has now confirmed that China has moved away […]</p>

The market is digesting a cut in the reserve requirement ratio by the People’s Bank of China that has now confirmed that China has moved away from a neutral monetary policy stance whilst adopting an easing bias, which will look to alleviate deflationary threats and stimulate growth. The cut of 100 basis points or 1% to 18.5% has suggested that an extra $1.2 trillion will be available to investors and is clear sign that Chinese monetary policy is now the PBoC’s tool of choice instead of using a weaker currency to fight the risk of deflation. The initial reaction in FX markets saw a boost in the risk trade but as the market digests the news questions are being asked if the PBoC are behind the curve and whether this measure is too little, too late.

The data from the US on Friday failed to stabilise the dollar, despite the core component of the inflation data showing signs of improvement along with the weekly jobless claims the day before. But with limited tier 1 data from across the pond this week, the market will focus on the volatile US durable goods data released on Friday as European data is likely to take centre stage with the release of ZEW and IFO surveys from Germany along with PMI data from across the EU.



 1.0705-1.0620-1.0505 | Resistance 1.0850-1.0900-1.1005



118.30-117.80-116.70| Resistance 119.30-119.80-120.30



Supports 1.4850-1.4700-1.4550 | Resistance 1.5050-1.5170-1.5250

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