FED: Gov Kugler: Full Tariff Impacts Yet To Come

Semafor reports that Democratic leaders, “keep drawing attention to President Donald Trump’s sagging poll numbers, but have no answer on why they’ve gotten even less support. [Democratic] Party pollsters worry that their brand is too associated with the political establishment.”

• Semafor summarises: ““Voters don’t necessarily trust that Democrats are going to stand up for them,” said Ian Smith, the director of polling and analytics at the Democratic firm Navigator Research. “Even folks that are seeing pain from what Trump’s doing see some logic in it.”
• “The optimistic case for Democrats, from Split Ticket’s Lakshya Jain, is that they’re only now about as weak as the average party after a loss. “The party out of power has a stink on them for a while,” he said. Democrats will confront one of their nagging problems tomorrow, when Joe and Jill Biden appear on The View.”
• The polling data may ease some potential concerns in the White House that Trump's declining approval rating could provoke greater pushback from Congressional Republicans who fear an election wipeout in 2026.

Figure 1: Americans’ View of the Democratic Party 

Source: Semafor, Democratic Party Weekly Poll Tracker, YouGov

Final March trade data confirmed a new record (nominal) deficit and the largest on a relative basis since 2005/06 in the imbalances ahead of the Great Financial Crisis. However, pharmaceutical tariff front-running and continued heavy imports of gold are greatly clouding interpretation of underlying trends. 

• The goods & services trade deficit was larger than expected in final March data, at $140.5bn (cons 137.2bn) after a slightly upward revised $123.2bn (initial $122.7bn) in Feb. It exceeds the $130.7bn in Jan.
• It came as the goods deficit confirmed a new record high of $163.5bn (larger again than the $162.0bn in the advance release) whilst the new data on the services surplus fell from $23.8bn in Feb to $23.0bn in Mar for the smallest surplus since Apr 2023.
• Of course, these are nominal figures whereas a better historical comparison is in % GDP terms. Here, and looking on a 3mth basis to smooth the data out, the goods deficit confirmed its widening to 6.2% GDP (last larger, and only just, in the 2005/06 imbalances before the GFC) whilst the services surplus held at 1.0% GDP as has broadly been the case since mid-2021.
• Pharmaceutical products, a point of contention for the Trump administration, were behind the 28% surge in consumer goods imports, attributing $20.9bn of the $22.5bn monthly increase.
• Specifically, pharma imports increased from $29.5bn to $50.4bn (71% M/M, and vs an average $20.5bn in 2024). That mostly tallied to a $15.5bn increase in imports from Ireland at $30.7bn – see the below chart for just how unprecedented this is in likely front-running ahead of previously touted pharmaceutical tariffs.
• Imports of monetary gold were off highs from Jan & Feb but still unsurprisingly had an outsized impact, with imports of finished metal shapes worth $21.3bn in March. That’s compared to $31.7bn in Feb and $34.2bn in Jan but an average of just $4bn in 2024. Comex inventories imply a significant moderation in this category in April. 

• RES 4: 1.3605 1.236 proj of the Feb 28 - Apr 3 - 7 price swing 
• RES 3: 1.3550 High Feb 24 ‘22 
• RES 2: 1.3510 1.236 proj of the Feb 28 - Apr 3 - 7 price swing 
• RES 1: 1.3444 High Apr 28 / 29 
• PRICE: 1.3363 @ 16:44 BST May 6
• SUP 1: 1.3257 Low May 5   
• SUP 2: 1.3232 20-day EMA
• SUP 3: 1.3041/3045 Low Apr 14 / 50-day EMA 
• SUP 4: 1.2968 Low Apr 11 

The latest pullback in GBPUSD appears corrective. A tweezer top formation on the daily candle chart last Monday/Tuesday, highlights a short-term top. Firm support at 1.3232, the 20-day EMA, remains intact. A break of this level would signal scope for a deeper retracement. Note that moving average studies are in a bull-mode position, signalling a dominant underlying uptrend. A resumption of gains would open 1.3510, a Fibonacci projection.