Muted response to PBOC’s liquidity easing move

PBOC slashes reserve ratio requirement for some banks

On Sunday the PBOC announced via its website that it was reducing some banks’ reserve ratio requirement by 100bps effective October 15, the fourth such move this year. The move is calculated to free up to 1.2 trillion yuan ($174 billion) for additional lending, and is seen as a precaution against the adverse growth impact of a full-blown US-China trade war.

On cue, as if to counter all the doom-and-gloom scenarios, the Caixin services PMI jumped to 53.1 in September from 51.5 the previous month. That’s the highest in three months and halts a two-month falling streak. The main boost came from the new business sub-index though services companies shed workers for the first time in over two years.

Onshore China markets opened after a week-long break with a bit of a whimper, with the catch-up factor of a week’s inactivity lording over the perceived impact of the liquidity easing. Maybe we will see more of an impact when the funds flow into the market from October 15. The China50 index fell as much as 1.2% before consolidating at 11,335. The index is currently sitting just above the 50% retracement level of the September 11 to 28 rally at 11,283.


China50 Daily Chart

Source: Oanda fxTrade


USD/CNH has been attacking the 6.90 level for the past five sessions, but has so far failed to close above it. This morning’s up-move could not take out last Thursday’s high of 6.9175 which would then bring the August 15 high of 6.9587 in to play. The 55-day moving average is now at 6.8537 with the FX pair now at 6.9025 .


USD/CNH Daily Chart

Source: Oanda fxTrade


China stops US oil imports

Chinese press is reporting that China has fully stopped oil imports from the US as the trade war escalates. It was reported on September 24 that the Sinopec unit was considering shelving its plan to increase US supplies on hold amid the trade war. Now, they appear to have taken the decision one step further.


WTI Daily Chart

Source: Oanda fxTrade


Oil prices retreated for a third day, easing back from the heady near 4-year highs touched last week. WTI is currently down 0.77% at $73.873 and, as my colleague Stephen Innes pointed out in his analysis this morning, there are a number of increasing factors to watch out when it comes to oil prices.


Markets Yield to pressure?


Holiday-affected data calendar

After the hustle and bustle of Friday’s data releases, the US and Canada take a holiday today, so the data calendar is a bit sparse later in the day. Germany’s industrial production data for August will be the early highlight and is expected to rise 0.5% m/m after July’s 1.1% decline. Factory orders data for the same month beat forecasts when it was released on Friday, so this might suggest an upside surprise could come. Euro-zone Sentix consumer confidence is also due along with the UK’s September like-for-like retail sales data from the British Retail Consortium.

You can view the full MarketPulse data calendar at

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Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.