Monetary Policy Easing Escalates as Other Banks Follow

Increasing monetary policy stimulus from the European Central Bank is escalating, as the bank’s meeting, this week comes closer. Yesterday, the euro was slightly under pressure trading rather neutrally.

The common currency managed to retrace back at $1.130 in Asian trading after slumping 0.1% on Friday, while Sterling slipped to $1.228-levels.

The dollar index fell 0.04% to 98.423, while the dollar itself traded at 106.91 yen, only slightly changed from Friday sessions.

On a more positive note, the Aussie dollar inched higher to $0.6860, which closed in neared to a six-week high of $0.6862.

The New Zealand dollar remained at $0.6428, which was only slightly distant to a three-week peak of Friday’s $0.6444.

As the regional economy is showing visible signs of dampening, it is expected that ECB policymakers will rely on monetary policy stimulus to strengthen the Eurozone economy.

Additionally, there has been a continuous rise in the anticipation for easing. Other major central banks have started to act against a looming monetary meltdown, including the People’s Bank of China (PBOC).

Yuan Drops as Central Bank Cut Cash Reserves

Last Friday, the PBOC slashed the amount of cash that is to be held by banks. For the third time this year, the Chinese central bank liquidated 900 billion yuan ($126.35 billion). According to the PBOC, this easing is an attempt to put a halt in the escalation of the slowing in its economy.

The PBOC has now declared its 7th monetary policy easing since early 2018.

The extended dispute between the United States and China, which will go into a second year, have caused policymakers to speed up on strengthening economic growth. It also increases the risk of recession.

Chinese exports unexpectedly slumped in August significantly hindered by a sharp slowdown in shipments to the US.

Following the news of the Chinese central bank easing, the yuan dampened yesterday in a state of surprise as the decline in exports surfaced on Sunday’s reports.

The onshore yuan decreased by 0.13% to 7.124 per dollar. Outside the mainland, the offshore yuan slipped 0.22% to 7.123 per dollar.