Forex Daily Review: China RRR Cut Speculations are Officially Denied

12 Oct 2012• Matti Williamson, FX and commodities analyst      China RRR cut Speculation Denial

Vicious speculations flooded the market in the European session China will cut its interest rate (RRR) at 04:15. EUR/USD violated some hefty stops as it topped 1.2984 but the bullish momentum may soon fade as forex traders are considering to dismiss the speculation of an imminent rate cut. The news provider (Dow Jones wire) that said to have reported the forthcoming RRR cut by the People's Bank of China (PBOC) are denying the news at the time of this writing, what a day!!

EUR/USD Intraday Analysis

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Forex Daily Review: China Initiated the Bearish Outlook for Gold, Crude Oil and AUD

My focus on AUD/USD is paying off. As expected, HSBC China Manufacturing PMI remained below 50.0, which indicates the economy is still contracting. A slowdown in China means it may purchase less goods from Australia, denting the AAA Australian sovereign rating. The Australian dollar (AUD) is expected to weaken against a basket of currencies on the fears that the Reserve Bank of Australia (RBA) will act and cut rates to counter the slowdown in China at the next monetary policy. The main trigger for Aussie-selling was a decline in China cola imports.

Gold

XAU/USD (gold) posted heavy losses as a result of the HSBC Manufacturing PMI. This was also expected as I outlined in my analysis. Despite the Fed's QE3, the weakness in gold and AUD are expected to continue throughout the upcoming months.

Brent Crude Oil

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