PBOC RRR Cut. What Does it Mean?
On the back of a 0.5% cut in February, Sunday saw the People’s Bank of China cut their Reserve Ratio Requirement (RRR) by 1%, leaving it at 18.5%.
It is essentially a $1 trillion Yaun (or $208 billion) stimulus to the economy through the release of capital.
The RRR cut was larger than expected from the market and will look to boost the growth outlook of the Chinese economy. This is because it encourages banks to lend more with their new found liquidity.
This liquidity will find its way into the already strong Chinese equity market, with the AUD also being a beneficiary of potentially increased Chinese demand.
As you can see, AUD/USD gapped up on the news, but pulled back. How sustained this rally will actually be is another thing. This move from the PBOC could be seen as reactionary and a big vote of no confidence in the Chinese economy.
On the Calendar Today:
We’ve just had the New Zealand CPI release, with the -0.3% number missing the -0.2% expectation but Asia will be all about the weekend’s Chinese news explained above.
A bit strange to see the RBA’s Stevens speaking during the US session. He’s currently in New York at the American Australian Association luncheon hosted by Goldman Sachs.
Monday:
NZD CPI
CAD BOC Gov Poloz Speaks
AUD RBA Gov Stevens Speaks
Chart of the Day:
This PBOC news doesn’t change the fact that the Aussie charts all still look very bearish.
AUD/USD Daily:
Click on chart to see a larger view.
Price has bounced off the bottom that it tested 3 times, pushing it out of that downward channel. But a channel that steep cant last forever, and although it’s broken out, price still hasn’t made a new higher low or confirmed any sort of strength above that 80c psych level.
AUD/NZD Daily:
Click on chart to see a larger view.
Likewise the AUD/NZD chart also doesn’t look very inviting for bulls.
Last week I posted a AUD/NZD short setup in our new Technical Analysis section of the Vantage FX News Centre, speaking about shorting into the zone marked with the green ‘x’. Price re-tested the level on news and was instantly rejected.
I still really like this setup, Chinese RRR cut or not.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.