- Australia to improve the regulatory system around crypto assets
- Shanghai shutdown of tourist spot at night, 'The Bund', to save power usage
- "China cuts rates again to shore up stumbling economy"
- PBOC sets USD/ CNY reference rate for today at 6.8198 (vs. estimate at 6.8251)
- China rate cuts: LPR 1 year 3.65% (from 3.7%) & 5 year 4.30% (from 4.45%)
- RBNZ's Richardson says 25bp rate hike was only briefly considered before +50bp was decided
- South Korean exports +3.9% so far in August
- RBNZ's Hawkesby says cash rate will be as high as 4.25% before RBNZ has more balanced view
- Oil market not as tight as originally thought, demand is weaker - price forecast lower
- World Bank economist warns of rising risk of 1970s & 80s style debt crisis
- EBC's Nagel says German economy is likely to suffer a recession if energy crisis deepens
- Fed Chair Powell speaking at Jackson Hole but no schedule for other central bankers
- Russia to shut down Nord Stream completely for three days from August 31
- Trade ideas thread - Monday, 22 August 2022
- Crypto technical analysis: Interesting spot to buy Ethereum here
- Sichuan province in China have extended power cuts - factories remain closed
- Media reports that a US Iran nuclear deal is not imminent
- Workers at the UK's biggest container port are due to begin an 8-day strike Sunday
- The weekend Forex report for the week starting August 22, 2022
China cut its one-year loan prime rate (LPR) to 3.65% from 3.7% and the five-year LPR to 4.30% from 4.45% on Monday. The cuts to LPRs were widely expected. A 10bp cut to the 1-year was the consensus expected, not the 5bp cut delivered. A 10bp cut to the 5-year was the consensus expected, not the 15bp cut delivered.
The larger cut to the longer-term rate seems to be based on two reasons. One, the five-year rate is that used more widely for mortgage-based lending. With China’s distressed property market a larger than expected cut looks likely aimed at improving borrower confidence.
On the one-year cut, smaller than expected, a key PBOC concern is capital flight out of the yuan and into foreign currencies. For example, if the Federal Reserve is hiking rates and the PBOC is cutting, wouldn’t it make sense to move capital into USD and out of yuan? Its not rocket science. A smaller cut to the shorter term rate makes capital flight slightly less likely, at the margin.
On the currency, the PBOC cut the onshore yuan’s fixing to its weakest (for the CNY) since September 2020, but again not weakening it as much as was the expected.
Chinese rate cuts served to support local equities and China -proxy trades, such as AUD.
AUD/JPY was a mover today. AUD/USD added on points to trade, briefly, above 0.6900. USD/JPY rallied too, moving above 137.40. The combined impact saw AUD/JPY higher on the session.
