Australian Dollar Falls by 1.3% Following Rate Cut

Non-Farm Payroll Data Disappoints: How Did Global Markets React?

(Continued from Prior Part)

Asian markets mixed as investors worry

Major Asian markets (AAXJ), with the exception of the Oceania markets, were trading with a negative bias on May. Australian monetary policy resulted in an uptick in equity markets in the Oceania region.

The Japanese (DXJ) Nikkei 225 resumed trading for the first time since Monday, as the index fell by a modest 0.25%. The US dollar-Japanese yen currency pair is inversely related to the Japanese yen. It was trading at 107.0 at 8:30 AM EST. The Chinese (MCHI) DJ Shanghai index was the biggest loser for the day, falling by 3.0% due to investor concern. Worries over Chinese markets grew after fertilizer company Inner Mongolia Nailun Group announced that it would not be able to meet payments to investors redeeming early.

Australian dollar falls by over 1.3%

In its monetary policy statement, the Reserve Bank of Australia (EWA) reported cuts to the core inflation target, to 1%–2% in 2016 and 1.5%–2.5% in mid-2018. The previous forecast for 2016 was 2%–3%. The massive cuts led to investors betting on another rate cut this year. The Australian dollar fell after the release of the monetary policy statement. The Australian dollar-US dollar currency pair fell by 1.3% at 7:30 AM EST, with the pair trading at 0.74. For more details on the rate cuts, read Mixed Asian Markets, RBA Cuts Interest Rate by 0.25%.

Malaysia’s trade balance

The Japanese (EWJ) Nikkei Services PMI ( purchasing managers’ index) for April came out below forecasts, at 49.3. This was against the forecast of 49.5 and the previous month’s figure of 50. A figure below 50 indicates a fall in service activity. The strengthening yen is regarded as one of the major factors for the downturn. The day also saw the release Malaysia’s trade balance. It was above forecasts, at a surplus of 11.2 billion Malaysian ringgit. The rise in the trade balance was primarily due to imports falling by 5.5% on a year-over-year basis. Exports rose slightly in March, by 0.2%.

Browse this series on Market Realist:

• Part 1 - Investors Get Bearish with Disappointing Non-Farm Payroll Data

• Part 2 - European Indexes Fall as Investors Wait for Non-Farm Payroll Data