China’s PBoC cut its main benchmark lending rate for the first time since August 2023 in a bid to shore up the economy.
The rising bets on the Fed rate cut this year might weigh on the Greenback and cap the pair’s upside.
The USD/CNH pair trades in positive territory for the third consecutive day around 7.2935 during the Asian trading hours on Monday. The uptick of the pair is bolstered by a surprise rate cut by the People's Bank of China (PBoC). The release
Early Monday, the Chinese central bank announced to cut the one-year Loan Prime Rate (LPR), benchmarks for the loans banks make to their customers, by 10 basis points (bps) from 3.45% to 3.35% and cut the five-year LPR from 3.95% to 3.85%. Additionally, the PBoC cut its main short-term policy rate for the first time since August 2023. The 7-day reverse repo was cut from 1.8% to 1.7%.
On the other hand, the prospect of a forthcoming Federal Reserve (Fed) rate cut might undermine the US Dollar (USD) and cap the upside for the pair. New York Federal Reserve President John Williams said on Friday that an interest rate cut could be warranted in the coming months, but not at its July policy meeting.
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