In an effort to revitalize its beleaguered property sector and inject vitality into the broader national economy, China has taken larger than expected action by reducing a crucial reference rate for mortgage loans.
PBoC announced a significant cut in five-year loan prime rate to 3.95% from 4.20%. This move surpassed market expectations of a more modest reduction of 5 to 15 basis points. Notably, this adjustment also represents the largest cut in the five-year LPR since its inception in 2019 .
Conversely, one-year LPR, which serves as a barometer for market lending rates, was left unchanged at 3.45%. T
In the aftermath of this announcement, the offshore Chinese Yuan sees modest appreciation. Technically, focus will now on whether USD/CNH’s current fall would push it through 7.1885 support. If realized, that would bolster the case that corrective recovery from 7.0870 has completed with three waves up to 7.2334. That would set the stage for further decline back to retest 7.0870 low in the near term.
