SECURITY: US Evacuation of Baghdad Embassy Supportive for Crude

Fed Gov Kugler continued to promote a patient outlook on rate cuts in a speech Monday, saying that "I view our current stance of monetary policy as well positioned for any changes in the macroeconomic environment." 

• She noted re last week's rate hold that "given the upside risks to inflation and given that I still view our policy stance as somewhat restrictive, I supported the decision...with inflation and employment potentially moving in opposite directions down the road, I will closely monitor developments as I consider the future path of policy".
• The post-speech Q&A revolved largely around inflation and tariffs. “If tariffs remain significantly larger relative to earlier in the year, the same is likely to be true for the economic effects, which will include higher inflation and slower growth." She says she "definitely" sees an "increase in prices and a slowdown in the economy", though "not to the same extent as before" the just-announced China-US tariff de-escalation.
• As such on rates "my basic outlook in some sense may have changed [since the US-China truce] in terms of the extent to which we need to use our tools - the magnitude - but not in the direction."
• She cites multiple factors potentially creating permanence in some of the price increases generated from tariffs. Productivity and market competition could decline. And Inflation expectations would also play a key role.
• Indeed, Kugler discussed inflation expectations at length: she was watching the dispersions of expectations in surveys; and that "we haven't seen" second-hand inflation in the form of higher wage demands. She also says that "really the only measure so far" where there has been an increase in longer-run inflation expectations is the University of Michigan survey, but she hints at some skepticism over the survey methodology and points to being "comforted by the fact that in other surveys you're not seeing it yet".

A new survey from Ipsos has found that “economy-minded” Americans have “soured” on President Donald Trump. The survey adds to a large quantity of data suggesting voters are lukewarm on Trump's economic agenda. 

• Ipsos notes: “Trump’s approval has slipped notably among Americans that view the economy as the main issue facing the country. But this comes even as factors like inflation and unemployment remain practically unchanged under Trump. Of course, the stock market has taken a slight tumble. But there’s more to this story.”
• The survey notes that Trump's support among Americans who don't rank the economy as their primary political issue remains relatively robust, gaining a one-point bump since his inauguration. That may raise optimism in the White House that the trade detente with China could prepare the ground for Trump to reverse his approval downswing in the coming weeks.  

Figure 1: Trump Approval Rating Controlled by Issues Viewed as Most Important

Source: Ipsos

• 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: 1.3402/3444 High May 6 / High Apr 28 / 29 and the bull trigger  
• PRICE: 1.3210 @ 16:28 BST May 12
• SUP 1: 1.3140 Low May 12   
• SUP 2: 1.3083 50-day EMA
• SUP 3: 1.3041 Low Apr 14  
• SUP 4: 1.2968 Low Apr 11 

GBPUSD has started this week’s session on a bearish note as the pair extends the correction that started Apr 29. The 20- day EMA has been breached. Furthermore, a minor head and shoulders formation on the daily chart reinforces the likelihood of a corrective pullback near-term. Key support to watch is 1.3083, the 50-day EMA. The bull trigger has been defined at 1.3444, the Apr 28 / 29 high. A break would resume the uptrend.