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10 Feb 2015
AUD spikes as PBOC easing priced in
FXStreet (Bali) - AUD/USD has popped up over 30 pips from its China-inflation figures low, reaching its highest at 0.7824 from 0.7792.
The soft Chinese inflation has resulted in the market pricing in higher odds of further PBOC easing, following the announcement of a 50bp cut in the reserve requirement ratio for the first time since May 2012, as the Central Bank aims to free up more capital and boost lending.
However, it should be noted that as fundamentals stand, with the AUD/USD rate currently at pre-RBA Feb 3 rate cut levels (above 0.78), and with the USD being backed up by a flawless US NFP last Friday, any China-stimulus spike in the AUD is likely to be seen as an opportunity to sell the AUD on strength given the broadening fundamental divergence.
The soft Chinese inflation has resulted in the market pricing in higher odds of further PBOC easing, following the announcement of a 50bp cut in the reserve requirement ratio for the first time since May 2012, as the Central Bank aims to free up more capital and boost lending.
However, it should be noted that as fundamentals stand, with the AUD/USD rate currently at pre-RBA Feb 3 rate cut levels (above 0.78), and with the USD being backed up by a flawless US NFP last Friday, any China-stimulus spike in the AUD is likely to be seen as an opportunity to sell the AUD on strength given the broadening fundamental divergence.