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Friday the People's Bank of China (PBOC) announced it will raise the reserve requirement ratio (RRR) by +50 bps to 19.5%, effective February 24.
This will be the 8th hike RRR in the current cycle and the 2nd one this year reflected the government's commitment to curb inflation.
Some players expressed concern about the impact of tightening on China's growth and commodity demand outlooks.
Shayne and I believe that while commodity prices may be pushed down initially on the announcement, the longer-term outlook remains Strong, as economic growth in China cannot be damped easily. And you likely noticed the Key rate raise was a market non-event.
The chaos in the Middle East and North Africa (MENA) raised concerns over Crude Oil supply disruption, as the unrest in Egypt drove Brent Crude Oil prices past 100 bbl, and have continued to trade above it.
Nymex Crude Oil prices have picked up a bit in the last couple of days, the WTI-Brent spread is still pretty wide, and the disconnected performance between the 2 benchmarks is expected to continue for some time to come.
This weekend the G-20 finance leaders agreed on indicators, such as trade balance, exchange rates, interest rates and public and private debts, to closer monitoring of global economic imbalances.
But, the measures to narrow imbalances were not compromised. As noted by French Finance Minister Christine Lagarde, the meeting's Host, 'it wasn't easy, there were obviously diverging interests'.
Macro-ecnomic data for released this coming week includes US consumer confidence which likely rose to a new 3 yr high.
In the EuroZone, flash PMI's are expected to have improved in the 17 Nation region as well as in Germany.
The minutes of the February BOE meeting may show more members favoring a tax rate hike.