The Australian dollar is on offer this morning against the US dollar even though the greenback remains relatively flat as measured by the DXY index. The selloff stemmed initially from concerns around the Chinese economy as the PBoC cut both the 1-year and 5-year loan prime rates by only 10bps respectively (refer to economic calendar below). In a push to stimulate economic growth, we may see further rate cuts going forward and with China’s low inflation relative to other major global economies, there is little in the way of limitations to continue easing monetary policy. Being a major trading partner with China, the grim outlook will hinder commodity exports from Australia thus weighing negatively on the Aussie dollar.
