Risk sentiment turned positive in the latter half of the week, easing concerns about a potential U.S. recession. The shift followed a federal court ruling that blocked President Donald Trump’s “Liberation Day” tariffs. Investors are also awaiting key U.S. economic data due later this week, including the Bureau of Economic Analysis’s second estimate of first-quarter GDP growth, weekly initial jobless claims, and April pending home sales.
Court Blocks Trump’s Tariffs, Citing Overreach
On Wednesday, the U.S. Court of International Trade ruled that President Trump exceeded his authority by imposing broad tariffs on imports from U.S. trading partners. According to Reuters, the three-judge panel stated, “Such an approach is impermissible, not because it is unwise or ineffective, but because it is not permitted under federal law.” The Trump administration has filed a notice of appeal, challenging the court’s jurisdiction in the matter.
Market Reaction: Dollar Strengthens, Stocks Rally
Following the court decision, the U.S. dollar rebounded, with the dollar index rising above 100.50 — its highest level in over a week. At the time of reporting, the index was up 0.25% at 100.12. U.S. stock futures also showed gains, climbing between 1.3% and 2%, reflecting improved investor confidence.
Federal Reserve Signals Economic Uncertainty
Minutes from the Federal Reserve’s May meeting revealed growing uncertainty among officials about the economic outlook. The report noted, “Participants noted that they could face difficult trade-offs if inflation persists while growth and employment prospects weaken.” This cautious tone adds to market volatility as investors weigh inflation risks against economic growth.
Commodity and Currency Movements
Gold prices fell sharply during the Asian session, dropping below $3,250 — the lowest since May 20 — before partially recovering. At the time of writing, gold (XAU/USD) was down 0.5%, trading near $3,270.
The euro (EUR/USD) extended weekly losses, touching 1.1200 before bouncing back above 1.1250 in early European trade.
The British pound (GBP/USD) continued to weaken in Asia, falling towards 1.3400 after two days of declines. It resumed a mild upward trend in early European trading, hovering around 1.3450.
Japan Affirms Market-Determined Exchange Rates
Japanese Finance Minister Katsunobu Kato expressed agreement with U.S. Treasury Secretary Janet Yellen (note: the text says Scott Bessant, likely an error; Janet Yellen is U.S. Treasury Secretary) that exchange rates should be determined by market forces. Meanwhile, Japan’s chief trade negotiator and Minister of Economics and Finance, Yoshinari Akazawa, said he hopes to hold ministerial talks with Yellen and reiterated Japan’s request for the U.S. to reconsider tariff measures.
The USD/JPY pair extended its weekly gains, breaking above 145.50 and rising about 0.5% on the day.
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