Article Highlights

  • Chinese central bank cut RRR by 1% over the weekend
  • PBoC considering further stimulus for China?
  • Greek Finance Minister Varoufakis warned of potential contagion on “Grexit”
  • New Zealand quarterly CPI down by 0.3% versus estimated 0.2% dip
  • Japanese tertiary industry activity up by 0.3% in Feb versus projected 0.6% decline
  • Magnitude 6.8 quake hit Okinawa, tsunami warning in Japan
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Aha! It’s about time the Chinese central bank admitted that their economy needs help! Over the weekend, the PBoC decided to reduce its reserve ratio requirement (RRR) by 1% – its largest cut in seven years – in order to encourage more lending and spending, which might hopefully boost growth later on. In addition, news reports indicated that officials are considering further easing since the country has been stuck in a rut recently.

Although the Chinese stock market opened lower this week, commodity currencies seemed to take the news positively since stimulus in China could spur stronger demand for raw material exports. AUD/USD gapped up and is higher by 34 pips (+0.43%) while NZD/USD is enjoying a 35-pip lead (+0.45%) so far, even though New Zealand printed a weaker than expected quarterly CPI of -0.3% versus estimates of a 0.2% decline.

The euro was unable to take part in these rallies though, as the shared currency continued to be weighed down by Greek debt woes. Take note that the debt-ridden nation has been given a deadline to submit a revised set of economic reforms this week before it can receive its next set of bailout funds.

Should their government fail to get approval from their creditors, Greece could be facing the possibility of getting kicked out of the euro zone and Finance Minister Varoufakis warned that this scenario could spark debt contagion. EUR/USD is down by 27 pips (-0.25%) while EUR/JPY just broke below the 128.00 handle and is looking at a 57-pip loss (-0.45%).

Risk-taking has also been limited among yen pairs today, as a magnitude 6.8 earthquake struck Okinawa and raised a tsunami alert in Japan. Data from the economy has been stronger than expected, with the tertiary industry activity index for February showed a 0.3% gain instead of the estimated 0.6% decline.

The forex calendar shows that there are no major reports lined up in the next few hours, with only the German producer price index (PPI) data release due. Do stay tuned for any updates surrounding the Greek debt talks, as the refusal of the Greek government or its creditors to seek a compromise could lead to more buzz about a “Grexit” and potential contagion.

U.S. Session Recap

Bonnie and Clyde, peanut butter and jelly, Justin Bieber and his hair. Some things just go well together.

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