USD/CNH hovers around 6.7400 as PBOC keeps the interest rate stable at 3.7%
- USD/CNH is struggling to surpass the crucial resistance of 6.7400 after PBOC’s prudent policy.
- The PBOC has kept the one-year LPR stable at 3.7% while the five-year LPR is reduced by 15 bps to 4.45%.
- The DXY has scaled above 103.00 as risk-off impulse rebounds.
The USD/CNF pair has remained quiet at around 6.7400 after the People’s Bank of China (PBOC) kept its one-year Loan Prime Rate (LPR) unchanged at 3.7%. The asset is gradually moving higher as the US dollar index (DXY) has climbed above 103.00 after a significant downside move to 102.66.
China’s yearly Consumer Price Index (CPI) in April climbed to 2.1%, firmly higher than the forecast of 1.8% and the prior print of 1.5%. Thanks to the advancing oil prices that are hurting the energy bills of the households in China. It is worth noting that China is the biggest importer of oil in the world and galloping oil prices are widening their fiscal deficit.
Apart from that, the resurgence of the Covid-19 in its largest cities: Shanghai and Beijing has dented their aggregate demand. After a thorough consideration of rising inflation and demand worries, the PBOC has decided to take the bullet and kept its one-year LPR stable at 3.7%. However, the five-year LPR is lowered by 15 basis points (bps). Now, the five-year LPR stands at 4.45% vs. 4.60% a month earlier.
Meanwhile, the DXY is displaying a meaningful pullback, which could drive the asset higher towards its crucial resistance at 103.20. The asset is comfortably holding itself above 103.00 despite an underperformance by the weekly Initial Jobless Claims (IJC). The weekly IJC landed at 218k, higher than the prior print of 200k.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
