Good morning. The US trade deficit fell 55 per cent in April, according to the commerce department. There was a noticeable uptick in exports, but the overall decline was mostly due to a drop in imports — pharmaceutical and gold bullion imports, in particular. Remember the argument that last quarter’s negative GDP reading would net out later this year, as tariff front-running recedes? That seems to be happening. Email us: unhedged@ft.com.  

Rate cuts

In December, the Federal Reserve made it clear that its rate-cutting cycle was on hold until the inflation and employment outlooks became clearer. Six months since that declaration, a strong case is emerging that the Fed should start cutting again — not necessarily at its June meeting, but soon. Today’s jobs report, which many are speculating will be weak, could strengthen that case.

So far, the Fed has had every reason to stay put. The inflation data has been on a slow downward trend. The labour market has held up well and even surprised to the upside on occasion. And despite reams of bad sentiment readings, there is still very little evidence of inflationary impacts in the hard data due to Donald Trump’s tariffs.