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USD/CNH slips below 6.8600 as PBOC leaves LPR unchanged

  • USD/CNH registers three-day losing streak.
  • PBOC keeps the rate easy, pumped marked recently.
  • Optimism surrounding the phase-two deal talks likely to fade.

USD/CNH declines to 6.8630, after marking a low of 6.8592, as China’s central bank left key lending rates unchanged on early Monday.

The People’s Bank of China (PBOC) announced no changes to its loan prime rates (LPR) with the one-year and five-year LPR being 4.15% and 4.80% respectively. Weekend news from the PBOC suggest that the Chinese central bank pumped 200 billion yuan into the financial system in an attempt to maintain liquidity in the banking system before the Spring Festival.

Read: PBOC keeps one-year loan prime rate steady at 4.15%

Following the signing up of a phase-one trade deal with the US, the Asian giant should ideally progress towards the next rounds of talks. However, headlines from the Global Times (GT) suggest that the dragon nation needs some time to consider the impact of a trade deal before moving forward.

On the contrary, the US President Donald Trump earlier said, “We will vigorously enforce its terms. Hopefully, we won't have to.”

The market’s risk tone remains mostly sluggish with the S&P 500 taking rounds to 3,327 following disturbing headlines from the Middle East.

The US markets are off today and hence a little momentum is expected. However, any trade/political announcement is likely to be ignored and might have a wild reaction due to the lack of liquidity.

Technical Analysis

July 2019 low near 6.8230 remains on the bears’ radar unless prices cross seven-week-old falling trend line, near 6.9310 now.

 

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