The Bank of England increased its QE program by 50 Billion GBP as expected, but its move was completely overshadowed by the surprise announcement from PBOC that it will lower its Reserve Requirement Ratio, cut the deposit rate by 25bp and cut its lending rate by 31bp. The news sent risk currencies spiking in early North American trade with Australian dollar rising above the 1.0300 level.

The news from PBOC will be viewed as welcome move for risk assets in global capital markets as the easing of Chinese monetary policy could revive demand in world’s second largest economy. The broad move that involved all three policy instruments suggests that Chinese authorities are serious about stimulating growth to offset the depressive effects of the slowdown in the EZ which have dampened demand for the country’s exports.

Eyes now turn to the ECB with traders looking for additional easing from Mr. Draghi and company beyond the 25bp cut that is expected. If the ECB suggests that it is considering further LTRO actions the news could provide a powerful support for risk assets and spur stronger rally in high beta FX.

If the background of global monetary easing could be enhanced by positive news on US labor front from ADP and ISM Services reports then the Aussie will likely be the prime beneficiary of this move as it remains king of the carry. This week’s RBA statement and better than expected Retail sales report indicated that the rate cutting cycle in Australia is over. The pair has been able to clear the 1.0300 level and could target 1.0350 as the day proceeds.