The fallout from Monday’s volatility continues to be felt in markets largely devoid of other fundamental drivers. Yesterday’s cut in both 1 year lending rates and required reserve ratio appears to have some stabilizing effect, although European equities were already recovering before this news. The move is the fifth cut in rates in the past nine months, so can be seen as following on from the trend of recent months, rather than as an attempt to prop up the tumbling equity market, which has managed to stabilise today. After the yuan devaluation earlier this month, China appear to be moving back from more direct intervention in markets.
For FX, it’s meant a reversal of many of the moves we saw earlier in the week, which largely favoured the traditional safe havens such as the Swiss franc and the yen. Commodity currencies through are struggling against the backdrop of continued weakness in global commodity prices. This leaves USDCAD at highs for the year and the AUDUSD very near lows for the year to date. It’s difficult to see commodity currencies recovering given the wider global environment currently being faced. For today, there are no major data releases on the calendar, with just US durable goods at 12:30 GMT.Publication source