Forex Flash: China lowers rates, RRR cut just around the corner

Forex Flash: China lowers rates, RRR cut just around the corner

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Forex Flash: China lowers rates, RRR cut just around the corner - Danske Bank

FITITOL--> FXstreet.com (Córdoba) - The Peoples Bank of China (PBoC) today cut its lending and deposit rate rates by 31bp and 25bp to 6% and 3%, respectively. "This is the second interest rate cut is less than one month and hence should be regarded as a relatively aggressive easing move", says the Danske Bank team.

"The market might be cynical about the move and as in June take the interest cut as an indication that the important economic data to be released next week will be weak", they say. "In our view, next week's data will show that the sharp drop in inflation is now allowing the PBoC to respond more aggressively to the recent subdued data".

"Today's interest rate cut has increased the likelihood that the leading interest rates will be cut by more than 25bp before year end. We still forecast another 50bp cut in the reserve requirement to be just around the corner", they conclude.