JGBS: Little Changed, Draft Fiscal Blueprint Calms Market

• The US has announced a reciprocal tariff rate of 46 percent on all Vietnamese products, a move that is already showing to significantly impact Vietnam’s trade-dependent economy.
• Whilst Vietnam's PMI has trended lower since the end of last year the pace of the April result looks likely to be a direct impact from tariff threats.   
• Falling to +45.6 from +50.5 in March it is one of the largest one month declines since COVID
• Vietnam had tried to change with tariffs on US goods being reduced and had even pushed through a regulatory change to  allow Elon Musk’s SpaceX to launch its Starlink in the country.
• Today's PMI however shows the real impact on the economy despite suggestions that tariffs may not go ahead and comes at a time when China's leader has been visiting nations such as Vietnam to sure up relations and offer alternatives.  
• SE nations PMIs for April have largely collapsed and how long it lasts will directly impact these export orientated economies.   

TYM5 is trading 111-12, up 0-07 from its close. 

• The US 10-year yield closed in the US around 4.3083%, it's a holiday in Japan today.
• The Wall Street Journal via BBG - "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start.”
• “Jerome Powell won’t be fired as Fed chair ahead of his scheduled exit, Trump suggested as he again urged the “already late” central bank to cut rates.”(per BBG)
• MNI Economist on FOMC Decision - “The FOMC will extend its series of rate holds to a third meeting in May, keeping the Fed funds target rate at 4.25-4.50% while maintaining its forward guidance in the Statement. At the press conference, Chair Powell is likely to warn about the risks to both sides of the dual mandate. Don’t anticipate any meaningful changes in the Statement, though any signal that the Fed is looking seriously at “soft” survey data to assess the outlook could be significant.
• The 10-year Yield range seems to be 4.10% - 4.45%, with the pivot the 4.30% area for now.
• Data: ISM Services PMI

Aussie outperformed on Friday as better-than-expected US payroll data drove an improvement in risk appetite. AUDUSD trended higher through the day and then stepped up following the figures to reach a peak of 0.6470. It finished up 1.0% to 0.6445 and has continued higher today to be +0.2% to 0.6445. The USD index fell 0.4% on Friday and is currently down another 0.1%.

• AUDUSD is consolidating and now approaching the 9 December high of 0.6471, thereafter the level to watch is 0.6528, 29 November 2024. The underlying trend remains bullish. Initial support is at 0.6344, 24 April low.
• The pound was the only G10 currency to fall against the USD on Friday leaving AUDGBP up 1.1% to 0.4859, close to the intraday high, and has started today lower at 0.4857. AUDEUR rose 0.9% to 0.5704 and is currently down again though at 0.5692.
• AUDJPY was 0.7% higher at 93.44 but down 0.2% to 93.20 today. AUDNZD rose 0.3% to 1.0841 after a peak of 1.0847 and is now at 1.0830.
• Equities rallied with the S&P up 1.5% and Euro stoxx +2.4% but US equity futures have started today lower down around 0.6%. Oil prices are down sharply following OPEC’s decision to increase output with WTI -4.1% to $55.88/bbl. Copper rose 1.5% on Friday and iron ore increased to around $97/t.
• Today the April Melbourne Institute inflation gauge and ANZ job ads are released.