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Aussie bulls got to work after the PBoC provided support for liquidity in the Chinese markets. Equities and commodity traders missed the memo, however, and focused on WHY the central bank made aggressive moves.

  • Japan’s markets out on Health-Sports Day holiday
  • PBOC cuts RRR over the weekend
  • AU ANZ job ads slip by another 0.8% vs. 0.7% decline in August
  • China’s Caixin services PMI up from 51.5 to 53.1 in September vs. 51.4 expected

Major Events/Reports:

PBOC starts the month with a bang

In case you missed it, the People’s Bank of China (PBOC) cut its reserve requirement ratio (RRR) by 100 basis points effective October 15.

This is the fourth time this year that the central bank has cut the level of cash that banks must hold as reserves and marks a step up in the government’s efforts to support liquidity amidst capital outflows due to trade war fears.

The move is expected to inject around 750B CNY ($109.2B) in cash into the banking system and release around 1.2T CNY in liquidity.

But wait, there’s more! Earlier today the central bank also set its mid-point yuan setting to 6,8957 per dollar, the lowest since May 2017 and is a hair’s breadth away from the 6.9000 psychological handle that a lot of market geeks are watching.

Overall risk aversion

Chinese traders returned to their desks today and, despite the PBOC’s RRR and yuan peg moves, they started the week in the red.

Turns out, investors are seeing the PBOC’s moves as confirmation that the government is concerned over the impact of its trade war with the U.S. on the economy.

  • A SX 200 is down by 0.70% to 6,15.8
  • Shanghai index is down by 2.95% to 2,738.044
  • Hang Seng is down by 0.85% to 26,345.9

Commodities weren’t any luckier, with gold weighed down by more dollar strength.

Meanwhile, a U.S. official hinting that the administration could consider exemptions for nations that have shown efforts to reduce Iranian oil imports have weighed on crude oil benchmarks alongside overall risk aversion.

  • Gold is down by 0.59% to $1,196.23 per troy ounce
  • Brent crude oil is down by 0.83% to $82.39 per barrel
  • U.S. WTI is down by 0.63% to $73.77 per barrel

Major Market Mover(s):

CAD

The Loonie, which has been riding on the coattails of crude oil price increases for the past few days, got dragged along with oil benchmarks taking hits today.

USD/CAD is up by 33 pips (+0.26%) to 1.2972; CAD/JPY is down by 7 pips (-0.08%) to 87.78; NZD/CAD is up by 25 pips (+0.31%) to .8354; EUR/CAD is up by 28 pips (+0.18%) to 1.4933; GBP/CAD is up by 36 pips (+0.21%) to 1.7005, and CAD/CHF is down by 20 pips (-0.26%) to .7643.

AUD

Aussie bulls cheered the PBOC’s decision to boost liquidity and support the economy by cutting its RRR and lowering its yuan reference point to its lowest since mid-2017.

AUD/USD is up by 8 pips (+0.11%) to .7057; AUD/JPY is up by 21 pips (+0.26%) to 80.36; AUD/CAD is up by 32 pips (+0.35%) to .9154; EUR/AUD is up by 24 pips (+0.15%) to 1.6313; GBP/AUD is up by 24 pips (+0.13%) to 1.8577, and AUD/NZD is up by 9 pips (+0.08%) to 1.0957.

CHF

There were no direct catalysts to drag the low-yielding franc higher, but the safe haven ended up taking hits against some of its counterparts.

EUR/CHF is down by 12 pips (-0.11%) to 1.1414; GBP/CHF is down by 10 pips (-0.08%) to 1.2997, and CHF/JPY is up by 24 pips (+0.21%) to 114.85.

JPY

What risk aversion? The low-yielding yen lost pips to its higher-yielding counterparts even as equities and commodities traders were busy painting the town (or maybe just the charts) red.

USD/JPY is up by 17 pips (+0.15%) to 113.87; NZD/JPY is up by 15 pips (+0.20%) to 73.33; GBP/JPY is up by 16 pips (+0.11%) to 149.28; EUR/JPY is up by 13 pips (+0.10%) to 131.09, and NZD/JPY is up by 15 pips (+0.20%) to 73.33.

Watch Out For:

  • 5:45 am GMT: Switzerland’s unemployment rate (2.5% expected, 2.6% previous)
  • 6:00 am GMT: Germany’s industrial production (0.4% expected, -1.3% previous)
  • 8:30 am GMT: Euro Zone Sentix investor confidence (11.4 expected, 12.0 previous)