PBoC Cuts Interest Rates

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(CN) CHINA CENTRAL BANK – PBOC CUTS INTEREST RATES (KEY 1-YEAR BENCHMARK RATES);

  • Effective July 6th (second cut in three months)- 1 year deposit rate cut by 25bps to 3.00%
  • 1-year lending Rate cut by 31bps to 6.00%
  • Lowers floor for lending rates to 70% of benchmark rate from 80%

Special Insight: The PBoC’s “prudent” monetary approach came into effect in December 2010, replacing its earlier “moderately loose” monetary policy. China has maintained a proactive fiscal policy since the inception of the 2008 financial crisis.

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Previously: June 7th: (CN) CHINA CENTRAL BANK (PBOC) CUTS KEY ONE-YEAR BENCHMARK RATES BY 25 BPS (FIRST CUT SINCE DEC 2008); as speculated.

  • Cuts 1-year deposit rate by 25 bps to 3.25% from 3.50% prior; effective Friday 8th June 
  • Cuts 1-year lending Rate by 25 bps to 6.31% from 6.56% prior; effective Friday 8th June

How to interpret these headlines?

I don’t know if this is becoming a habit, but PBoC has been announcing its surprise Rate Decision by beating BOE (Bank of England) to the punch, 2 times in a row now.  Last time it was also seconds before the BOE Rate Decision release where PBoC made the surprise announcement and ended up pretty much overshadowing the BOE Rate Decision for the rest of the day, and if this becomes a habit, then we will have to re-think how we trade BOE Rate Decisions.

With that being said, I believe this takes the edge off risk aversion sentiment for the time being, and obviously AUD is getting a lot of support that despite of the disappointment from ECB, AUD still manages to end the day in positive territory where EUR is likely to end up negative 150 pips…  Therefore, I am more open now to BUY AUDUSD or AUDJPY on dips as actions out of China, Australia’s largest trade partner, should keep demand for AUD high, and considering that RBA decided to keep rates unchanged this week, AUD should remain resilient.

 

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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

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  1. […] Interest Rate Decision and the all important ECB Press Conference. The drama is far from over as The People’s Bank of China (PBoC) surprised markets just seconds before the anticipated APT increase from the BOE, by announcing an […]

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