China: Reform-oriented stance augurs targeted RRR cuts - ANZ

Sandeep Kanihama FXStreet Contributor

ANZ analysts suggest that their scenario analysis suggests that a 50bp cut in the reserve requirement ratio (RRR) of PBoC will release about CNY800bn of reserve money into the system, while a 100bp cut will release about CNY1,600bn.

Key Quotes

“A 50bp cut will also lift the Excess Reserve Ratio (ERR) from 1.7% in February (our estimates) to 2.2%, while a 100bp cut will boost it to 2.7%. Either way, a cut will help restore liquidity in the banking sector to levels comparable to that seen in end-December 2018.”

“The higher ERR derived from a RRR cut could be associated with a 25bp reduction in the weighted average lending rate, according to our calculations. This echoes Premier Li Keqiang’s commitment, made at the recent National People’s Congress (NPC), to reduce funding costs for the private sector.”

“We believe the People’s Bank of China (PBoC) is not inclined to cut the benchmark lending and deposit rates. It will also keep the 7-day reverse repo rate on hold, unless other major central banks resume a rate-cutting cycle. Instead, the PBoC is likely to use multiple tools to influence the actual lending rates that banks are charging their clients.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD flirts with daily highs, retargets 1.1900

EUR/USD regains upside traction, returning to the 1.1880 zone and refocusing its attention to the key 1.1900 barrier. The pair’s slight gains comes against the backdrop of a humble decline in the US Dollar as investors continue to assess the latest US CPI readings and the potential Fed’s rate path.

GBP/USD remains well bid around 1.3650

GBP/USD maintains its upside momentum in place, hovering around daily highs near 1.3650 and setting aside part of the recent three-day drop. Cable’s improved sentiment comes on the back of the Greenback’s irresolute price action, while recent hawkish comments from the BoE’s Pill also collaborate with the uptick.

Gold clings to gains just above $5,000/oz

Gold is reclaiming part of the ground lost on Wednesday’s marked decline, as bargain-hunters keep piling up and lifting prices past the key $5,000 per troy ounce. The precious metal’s move higher is also underpinned by the slight pullback in the US Dollar and declining US Treasury yields across the curve.

Crypto Today: Bitcoin, Ethereum, XRP in choppy price action, weighed down by falling institutional interest

Bitcoin's upside remains largely constrained amid weak technicals and declining institutional interest. Ethereum trades sideways above $1,900 support with the upside capped below $2,000 amid ETF outflows.

Week ahead – Data blitz, Fed Minutes and RBNZ decision in the spotlight

US GDP and PCE inflation are main highlights, plus the Fed minutes. UK and Japan have busy calendars too with focus on CPI. Flash PMIs for February will also be doing the rounds. RBNZ meets, is unlikely to follow RBA’s hawkish path.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.