JPY: Asia Wrap - Risk Drifting Lower, The JPY Benefits

TYM5 has traded a little higher with a range of 112-04 to 112-09 during the Asia-Pacific session. It last changed hands at 112-06, up 0-01 from the previous close.

• The US 10-year yield is a little lower, dealing around 4.16%, down from its close around 4.1716%.
• The US 2-year yield is unchanged, dealing around 3.65%.
• US President Trump has spoken at a rally in Michigan, which marks his first 100 days in office. The speech was big on rhetoric, but policy related areas of interest for the market remained light.
• “The trade deficit widened to a record in March, and consumer spending slowed, contributing to the GDP growth slowdown.”(per BBG)
• MNI Economist re GDP - “Domestic demand should look somewhat more robust but will be clouded by question marks over the extent to which areas of strength were driven by tariff front-running”.
• Month End flow will continue to be a key driver tonight.
• The 10-year Yield, has put in a lower high around 4.40% and has broken through the recent support around 4.25%. The next support is towards the 4.10 area which should find supply once more.
• Data/Events :  ADP private jobs data, GDP, Chicago PMI, PCE and Home Sales. 

AUDUSD jumped on the moderately higher-than-expected Q1 CPI data that included upward revisions to Q4 and Aussie is now outperforming the rest of the G10, despite mixed equities and lower commodity prices. It reached a low of 0.6379 before the data and then jumped to 0.6407 following the print but has struggled to hold the break above 64c and is currently around 0.6398 to be up 0.2% today. The USD index is little changed.

• AUDNZD has trended higher through most of the session and is now +0.3% to 1.0792, close to today’s peak.
• AUDJPY is up 0.2% to 91.09, close to the intraday high of 91.22. AUDEUR rose to 0.5634 following Australia’s inflation data and is now +0.3% to 0.5624. AUDGBP is also 0.3% higher at 0.4777 off the peak of 0.4781.
• Equities are mixed with the ASX up 0.2% but Hang Seng down 0.4% and S&P e-mini -0.5%. Oil continues to sell off with WTI -0.9% to $59.90. Copper is down 1.2% and iron ore is around $98/t.
• Later US Q1 GDP & employment costs, March core PCE prices, April MNI Chicago PMI & ADP employment print. Also preliminary April euro area CPI, Q1 GDP including Germany, France & Italy, German March retail sales & unemployment are released. BoE’s Lombardelli speaks.

At the Tokyo lunch break, JGB futures are little changed, +1 compared to the settlement levels.

• March preliminary industrial production was below market forecasts, down 1.1%m/m, versus -0.4% expected. In y/y terms, we came in at -0.3% versus 0.8% forecast (0.1% was the prior outcome). The y/y trend hasn't been able to see much upside traction for a number of years now. The current y/y pace is slightly above averages for 2023/24, but only marginally.
• Retail sales were slightly below market forecasts. We were -1.2%m/m, against a 0.7% forecast, with Feb revised to a 0.4% gain. In y/y terms, we rose 3.1%, against a 3.5% forecast and 1.3% in Feb. The y/y trend is around mid-range of the past 12 months, as we have oscillated between flat to +5%. The authorities remain focused on driving sustained/positive real household spending growth, aided by positive real wages growth. The next round of labour earnings data is due next Friday.
• Cash US tsys are slightly mixed, with a flattening bias, in today's Asia-Pac session after yesterday's modest rally.
• Cash JGBs are mixed, with benchmark yields 1bp lower (5-year) to 1bp higher (30-year). The benchmark 10-year yield is 0.3bp higher at 1.321% versus the cycle high of 1.596%.
• Swap rates are 1-2bps lower. Swap spreads are mixed.