The People's Bank of China holds interest rates in the February meeting.

The Chinese yuan weakened slightly despite the People's Bank of China's (PBoC) pledge to support the currency amid growing pressure from the strengthening US dollar. The rise of the US dollar stems from the Federal Reserve's hawkish stance on interest rate cuts and tariff pressures imposed by President Donald Trump, which could potentially increase domestic inflation. However, the yuan received some support from President Trump's remarks about being open to trade negotiations with China, leading to a more optimistic outlook among investors regarding US-China relations.

In its Q4 monetary policy implementation report, the PBoC stated that it would adjust its monetary policy at appropriate times to support the domestic economy, as external pressures have intensified while domestic demand continues to show signs of slowing down. Additionally, there are risks associated with deflation and escalating trade tensions. To address these risks, the PBoC needs to implement comprehensive monetary policies, including adjustments to interest rates and bank reserve ratios.

Nonetheless, any monetary policy adjustments must be tailored to both domestic and global economic conditions. The PBoC also reaffirmed its commitment to maintaining sufficient liquidity, supporting a moderate recovery of inflation rates, and ensuring the stability of the yuan’s exchange rate at a reasonable level. Regarding GDP, Chinese officials expect stable economic growth in 2025 after the economy expanded by 5.0% last year.

Chinese banks issued new loans worth 5.13 trillion yuan in January, marking a record-high expansion and exceeding market forecasts of 800 billion yuan. This surge in lending was driven by economic stimulus measures aimed at supporting loans. Additionally, lenders often extend credit earlier in the year to attract clients and expand market share, resulting in a 7% year-on-year increase in money supply.

The PBoC decided to hold interest rates steady for the fourth consecutive month during its February meeting, in line with market expectations. The 1-year Loan Prime Rate (LPR)—the benchmark lending rate for most business and household loans—remained at 3.1%, while the 5-year LPR—used as a reference rate for mortgage loans—stayed at 3.6%. Both rates are at historic lows following rate cuts in October and July of the previous year.

The decision to maintain interest rates comes amid volatility in the yuan and economic pressures from President Donald Trump's trade policies aimed at stimulating the US economy through import tariffs. Meanwhile, the PBoC recently announced that it would adjust monetary policies at appropriate times to support the sluggish economy. This includes potential changes in interest rates and the reserve requirement ratio for commercial banks to encourage increased borrowing within the economy.

Techical analysis data (5H)

Resistance: 7.2741, 7.2927, 7.3016

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 7.2377 - 7.2466 but cannot break the support at 7.2466, you may set a TP at approximately 7.2927 and SL at around 7.2191 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 7.2741 - 7.2927, you may set a TP at approximately 7.3016 and SL at around 7.2377 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 7.2741 - 7.2927 but cannot break the resistance at 7.2741, you may set a TP at approximately 7.2377 and SL at around 7.3016 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 7.2377 - 7.2466, you may set a TP at approximately 7.2191 and SL at around 7.2927 or according to your acceptable risk.

Pivot point February 22, 2025 08:22 PM. GMT+7