BoJ Surprises, Leaving Monetary Policy Unchanged

While services sector continued to underpin the UK economy, a slump in manufacturing and construction saw the UK's economy only growing at a pace of 0.40% in the first three months of the year. This comes following the final quarter of 2015, which showed the UK's economy expanding at a pace of 0.60%. The slow pace of growth was marked by a 0.60% increase in the services sector while production fell 0.40%, construction output fell 0.90% and agriculture slipped by 0.10%. The UK's GDP was 2.10% higher in the first quarter compared with the same period a year ago. “Brexit” still remains a big concern in the UK and that has led to slower investments in the economy. Preliminary data for the second quarter also shows that it is starting off on a weak note.

In the overnight session, the Reserve Bank of New Zealand's monetary policy saw the central bank holding interest rate at 2.25%, unchanged from its previous meeting. But the central bank has kept the rate cut option on the table noting that further policy easing would be required to ensure that future average inflation would move closer to the central bank's target. The RBNZ expressed concerns on fading inflation expectations and expects a near term decline although long term expectations were well anchored to the bank's 2.0% target range. The policy decision in April now pushes off any possible rate changes until the RBNZ's next meetings in June and August where a consensus is building for at least another 25bps rate cut.