Market Brief: PBOC Cut Repo Rate To Soothe Hard Landing Fears
View our guide on how to interpret the FX Dashboard
- China trimmed their key repo rate for the first time since 2015, which suggests further stimulus from Beijing could be underway.
- Over the weekend, opinion polls showed support for Boris Johnson’s conservative party to be are at their highest levels since 2017, helping to support GBP in Asia. Johnson also pledged to provide up to £1 billion in tax breaks for businesses to help support the economy.
- On Sunday, a Chinese state news wire Xinhua reported that the US and China had “constructive talks”. The US is also expected to extend a license which allows US companies to deal with Huawei by 2 weeks.
- GBP and EUR are the strongest majors, AUD and JPY are the weakest. GBP/NZD and GBP/NZD are today’s biggest gainers. Overall, volatility remains on the quiet side with most pairs daily ranges remaining beneath 50% of their 10-day ATR.
- Mix trading are seen in key Asian stock markets as we kickstart a brand-new week. The on-going anti-government demonstrations in Hong Kong has intensified over the weekend where the police have embarked on a dispersion operation on protestors that are holding the fort in one of the universities. Violent clashes have erupted between protestors and police forces in the last 48 hours.
- The China central bank, PBOC has managed to reverse the negative sentiment via an unexpected cut to the 7-day repo rate to 2.50% from 2.55%, the first such cut in more than four years and a signal that Chinese policy makers stand ready to inject liquidity to prop up growth.The Hong Kong’s Hang Seng Index (HSI) has rallied by 0.80% so far after being the worst performer last week with decline of -4.10% coupled with a modest gain of 0.44% seen in the China A50. The current gain seen in the HSI has been accompanied with a lacklustre volume reading of 575 million shares traded that is lower than the last 5-day of average trading volume.
- Both the South Korea’s Kospi 200 and Australia’s ASX 200 have seen losses of around -0.40%. The ASX 200 has failed to breach above its 3-month high at 6800 on the 2nd attempt dragged down by gold mining and financial stocks where, National Australian Bank, Commonwealth Bank of Australia and Westpac Banking shed between -0.7% to -0.8%.
- After another fresh all-time high print of 3120 on the S&P 500 seen last Fri, the S&P 500 E-Mini futures are trading almost unchanged in today’s Asian session with tight range of 6 points.
- A quiet calendar leaves the potential for smaller daily ranges, unless an unexpected catalyst arrives.
Matt Simpson and Kelvin Wong both contributed to this articleData from Refinitiv. Index names may not reflect tradable instruments and not all markets are available in all regions.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.