Pound Australian Dollar and Pound New Zealand Dollar Rates Could Dip As China Loosens Monetary Policy

Modified: Sunday, 13 May 2012 21:05 BST - Written by John Cameron

STORY LINK Pound Australian Dollar and Pound New Zealand Dollar Rates Could Dip As China Loosens Monetary Policy

Friday’s Asian session saw the release of data which provided further evidence that the Chinese economy is expanding at a slower pace. The annualised Industrial Production figure registered at 9.3%, versus an anticipated 12.2%. This showing was the lowest level that Chinese industrial output had expended by for some three years. Chinese Retail Sales numbers, also released on Friday printed at a year-on-year 14.7%, down from the previous month’s 14.8%. Analysts had been expecting a slight increase to 14.9%.

Initially, the poor Chinese numbers hit the high-yielding and commodity-driven currencies hard, sending the AUD, NZD, ZAR and CAD lower in the early part of Friday’s European session. Support for the Canadian Dollar flooded back into the market during the last afternoon session of the week with the release of Canadian employment figures which battered expectations, showing that a net total of 58,200 new jobs had been created in the domestic economy last month.

However, the Australian and New Zealand Dollars and the Rand did not have any supportive data to help soften the blow before Friday’s market close.

The weekend shut-down did see a major announcement from the Chinese Central Bank which is likely to provide assistance to the AUD, NAD, ZAR and CAD as this week’s session gets underway. The People’s Bank of China revealed that it is set to reduce the amount of liquid assets the country’s retail banks will have to keep on deposit from 20.5% to 20.0% of their total liabilities. This is the third time since last November that China has loosened its monetary policy, suggesting that policy-makers are willing to relax their stance on price rises in an effort to increase levels of growth. This is music to the ears of risk-sensitive currencies and those economies which depend on global exports for their future well-being.

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