People's Bank of China (PBOC) Cut Rates - 20.6.2023

On Monday, the US dollar index continued its sluggish rise for the 2nd day in a row. Trading activity was low due to the American Juneteenth holiday. This morning, the People's Bank of China (PBOC) cut its 1-year Loan Prime Rate (LPR) to 3.55% from 3.65% and 5-year to 4.2% from 4.3%. This contributed to a slight weakening of the Chinese yuan. The Aussie and New Zealand dollars have markedly strengthened this morning as a rate cut in China could boost economic growth and increase demand for commodities from Australia and New Zealand. We also note a good increase in the Westpac New Zealand Consumer Confidence indicator for the 2nd quarter. Japan Industrial Production for April in the final assessment unexpectedly fell by -0.7% y/y. USDJPY made a new high in the morning, but so far they have not been able to gain a foothold above 142 and are now correcting down.

Bitcoin quotes rose slightly yesterday. Now they are about $26,800. Players hope that the trial of the activities of crypto exchanges in the United States will mainly concern technical issues.

US stocks did not trade yesterday due to the Juneteenth holiday. Now futures for US stock indices have fallen. Probably, market participants are counting on the continuation of the correction that began on Friday last week. Let's note today's fall in quotes of some Asian and Chinese stock indices despite the decrease in the rate of the Chinese Central Bank. In particular, the Hang Seng fell 1.6%. Today will be published data on the residential real estate market United States Building Permits and Housing Starts.

On Monday, oil quotes remained almost unchanged. They are up slightly this morning as a result of a rate cut in China. This is expected to stimulate demand. Note that according to the forecast of the US Energy Information Administration (EIA), the average price of Brent in the 2nd half of 2023 may be $79 per barrel and increase to $84 per barrel in 2024. The EIA predicts that the average natural gas price in H2 2023 could be $2.9 mmBtu and increase to $3.4 mmBtu in 2024.

Natural gas in Europe rose to $410 per 1,000 cubic meters on ICE Dutch TTF. US gas quotes on Henry Hub rose to $2,713 mmBtu. A positive factor was the deal between China National Petroleum Corporation (CNPC) and Qatar Energy to supply natural gas to China for 27 years in the amount of 4 million tons of liquefied natural gas (LNG) per year.