The Peoples Bank of China again stepped in yesterday and decreased the reserve requirements ratio by 50 basis points and also cut its main interest rate down to 4.6%. This action from China’s central bank helped slow down the sell-off on the stock markets seen on what is now called ‘Black Monday’. This in turn saw the Pound and Greenback both regain some of Monday’s losses against the Euro throughout yesterday. China’s move in cutting rates for a fifth time since November is to support and promote sustainable growth for the real economy. Overall, this move was seen as a positive as markets saw gains yesterday and regained further losses from the start of the week.
Earlier in the day, figures from Germany gave the Eurozone a boost, as the IFO business climate for August posted a bullish 108.3. The figure was above the previous months 108.0 and beat expectations, showing that the powerhouse of the single currency zone continues to be a rock in uncertain waters. The better than expected reading points to a brighter and improved future economy. However, this failed to support the Euro as the focus of the markets was still on the fallout of China’s moves.
Core durable goods will be monitored to see if it can continue to increase on the back of last month’s bullish 0.8%. Core durable goods will be the main focus as the reading excludes the volatile aircraft orders; which can severely distort the underlying trend.