China Enters Rate-Cutting Cycle
Good morning and welcome to what could well be an interesting week on the markets if we take away the US being off on Thursday for Thanksgiving followed by the madness that is Black Friday.
The focus seemed to switch from Japan to China as, in a move that is seen as being positive for risk sentiment in the markets and commodities, the People’s Bank of China slashed its policy by 0.25% to 2.75%. This has shown that supporting growth now appears to be the priority as the POBC has shifted its focus towards broad based stimulus and we should expect further interest rate cuts as we appear to have entered into a rate-cut cycle.
There will be further focus on the Eurozone and the possibility of Quantitative Easing on the back of various comments. Mario Draghi commented on doing whatever it takes to raise inflation and was backed by ECB Vice President Constancio who hinted at the arrival of QE in Q1 next year.
There is a feeling that this could be a good week for the Pound if Q3 GDP comes in as expected, and there is also a chance that the US Dollar could struggle if its recent strength is seen to be on the back of BOJ, ECB and BOE dovish actions as opposed to its own positive growth.
Main news out today is IFO from Germany and PMI from the US.