The People’s Bank of China announced a surprise cut of its benchmark interest rates by 25 basis points on Thursday in an effort to stimulate the slowing Chinese economy. This is the first rate cut since the 2008-09 financial crisis.
The move was unexpected to many who thought that the PBOC would instead cut the required reserve ratio (RRR) of the country’s banks and would refrain from an outright cut to interest rates.
The China rate cut decision has had a positive impact on risk positive currencies like the euro, aussie and loonie which rose after the news. Australia is a major trading partner of China and so the Australian currency reacted the most.
However, there is concern that with industrial production and CPI data coming out of China over the weekend . At least today’s news is indicative of weak data going forward.
AUDUSD jumped to 0.9990, the highest since May 15 and up from an earlier low of 0.9910.