Highlights of the week ended May 9

Source: Dukascopy Bank SA
Australia
The Reserve Bank of Australia cut interest rates to a new low against the backdrop of a deteriorating economic outlook and a stronger exchange rate. The RBA slashed the benchmark cash rate by 25 basis points to 2.0% in an attempt to back up demand, following the surprise decision to keep rates unchanged at 2.25% in April. The move marked the second time this year the central bank has eased its monetary policy, but the bank did not indicate whether it considers to loose policy further. Lower interest rates should make the Australian Dollar less attractive to foreign investors, pushing the value down and giving a much-needed support to industries such as tourism, manufacturing, agriculture and higher education. 

Japan
The Bank of Japan's policy meeting minutes showed a unity of policy makers has cracked. BoJ board member Takahide Kiuchi urged the BOJ to immediately reduce its annual Japanese government bond purchase target by almost half to 45 trillion yen a year. The proposal was met with stiff resistance from other policy-setters, who claimed cutting asset purchases before the inflation goal is reached would likely limit effects of policy steps. Japan's consumer inflation was at 0.2% in March, considerably below the 2% inflation target. Thus, on the backdrop of precipitous decline in  global oil prices, the Bank of Japan recently abandoned its informal timeframe for reaching a 2% inflation target. The central bank now expects to reach the targeted level in the first half of fiscal 2016 depending on oil prices movement. On top of that, some members admitted that annual consumer inflation might turn negative in coming months.

China
Services sector in the world's second biggest economy, China, rose at its fastest pace this year in April as a sizzling stock market rally helped bolster consumer confidence and spending. The services PMI climbed to a four-month high of 52.9 in April, compared with 52.3 in March, firmly above the 50-point level that separates expansion from a contraction in activity on a monthly basis. Some companies attributed part of the increase in new business to the sturdy stock market, which reached a seven-year peak in April, suggesting that the wealth effect had seeped into parts of the nation's economy. However, the HSBC/Markit China's services PMI data showed final prices of services dropped to the lowest level in 15 months in April as some companies were forced to cut prices to boost sales. Meanwhile, new orders and employment grew modestly in the sector. China's services sector, a key source of employment, has been growing at a faster pace than the country's manufacturing sector. Yet, analysts expected that service providers may face difficulties this year due to a property downturn and slower economic growth.

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