China’s yuan hit a 16-month high against the US dollar on Tuesday, after the central bank of the world’s second-largest economy revealed new stimulus measures, while the greenback extended declines against other major currencies after soft data on the consumer.
Beijing’s new plan includes a planned 50 basis point cut to banks’ reserve requirement ratios, injecting more funds into the economy and an easing of mortgage repayments for households.
Economic Data and Events Released Yesterday
- U.S. Consumer confidence deteriorated across the board on Tuesday, and consumer expectations of 12-month inflation accelerated to 5.2%.
- Reserve Bank of Australia’s statement on Tuesday after its monthly monetary policy meeting. At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.25 per cent.
- The People’s Bank of China, in a joint press conference with top regulators, announced that banks’ reserve requirement ratios will be cut by 50 basis points. The seven-day reverse repo rate will also be cut by 20 bps; it was last reduced by 10 bps in July.
- The central bank also said the medium-term lending facility rate will be lowered by 30 bps, while benchmark loan prime rates, which were unexpectedly held steady last Friday, will be trimmed by 20-25 bps.
Commodity Update
Gold: Gold rose 1% and hit a record high, building on its recent rally as Middle East tensions fed its safe-haven appeal, while investors latched on to fresh cues for more U.S. interest rate cuts.
Crude Oil: Oil prices climbed about 2% to a three-week high on news of monetary stimulus from China, the world’s top crude importer, and amid concerns that growing conflict in the Middle East could hit regional supply. Further, prices gave up some earlier gains as it became clearer that a hurricane threatening the U.S. Gulf Coast later this week would likely miss most offshore oil and natural gas producing regions and hit Florida. The region accounts for 15% of the country’s oil and 2% of natural gas production.
Copper : Copper prices reached their strongest level in 10 weeks on Tuesday, following China’s unveiling of new stimulus measures to bolster its economy. Concurrently, the Chinese yuan appreciated to a 16-month high against the U.S. dollar.
Yesterday’s price action
MCX gold futures settled +0.95% to 75003. Silver settled 3.54% to 92393. Copper settled +3.71% to 836.45. Crude oil +1.44% at 5983. Natural gas -1.20% to 213.90
Major Economic Data and Event scheduled today
Australia
At 7.00am – CPI y/y. Data is foreseen at 2.7% from previous 3.5%.
Above data could have a positive impact on the Dollar.
Japan
At 10.30am- CPI y/y. Data is foreseen at 1.8% from previous 1.8%.
Above data could have a neutral impact on the Yen.
Eurozone
No Major data scheduled
CANADA
No Major Data sheduled
US
At 7.30pm – New Home Sales. Data is foreseen at 699k from previous 739k.
At 8.00pm- Crude Oil Inventories Above data could have a mixed impact on the dollar.
Happy Trading!
Commodity Samachar Securities
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Also Read: Copper sparked after China stimulus measures – What next? On the Edge of 26,000: Nifty’s Next Big Leap?
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