VIEW: TD Securities Still Look For Further PBoC Easing In Coming Weeks

TD Securities note that “the better-than-expected activity data explains why there was no cut in the Medium Term Lending Facility (MLF) rate today, contrary to expectations, though we think this is a pause rather than any shift in policy stance. We continue to expect cuts in the Loan Prime Rate (LPR) and Reserve Requirement Ratio (RRR) in the weeks ahead as growth loses momentum. We also note that the CNY fixing has been set sharply weaker over recent days, suggesting that the PBoC is increasingly concerned about CNY strength at a time of weaker growth momentum. As such, the prospects for more aggressive steps to weaken the currency are growing and the near-term outlook for CNY/CNH is worsening.”