Key Market Takeaways

A notable shift in the legal landscape around US trade policy:

🔹 Appeals Court Reverses Previous Ruling The US Court of Appeals has overturned the earlier decision that deemed former President Trump’s tariffs unlawful.

What this means:

• 📌 Tariffs remain in place – For now, the ruling allows the continuation of tariffs while the legal process unfolds.
• 📌 Uncertainty lingers – Ongoing legal challenges keep trade policy in flux, which may lead to more market volatility.
• 📌 Potential dollar support – The decision could offer short-term backing for the USD, depending on how markets interpret its impact on trade flows.

Market Recap:

• US Dollar & Equities Pull Back The dollar and US equity markets gave up overnight gains following weaker-than-expected employment data and a negative revision to Q1 GDP growth (-0.2%).
• Tariff Relief Rally Fizzles Early optimism from the US court’s initial ruling on Trump-era tariffs faded as broader uncertainty returned. Both the dollar and equities ended lower than pre-announcement levels, suggesting traders remain cautious.
• Sterling Softens on Risk Aversion The British pound slipped amid the broader risk-off environment, reflecting reduced demand for higher-yielding or risk-sensitive assets.
• Safe Haven Currencies in Demand As sentiment turned defensive, traditional safe havens—the euro, Japanese yen, and Swiss franc—saw increased buying interest.

Today’s Market Update:

• Tariff Ruling Paused The US Court of Appeals put a temporary hold on the previous ruling that deemed Trump-era tariffs illegal. This means those global tariffs remain in effect for now, while the administration reportedly considers a short-term measure to reintroduce tariffs of up to 15% for 150 days.
• Dollar Rebounds Slightly After falling earlier in the week, the dollar clawed back some ground as traders reassessed positions ahead of upcoming inflation data. Still, the underlying tone remains one of dollar selling on strength, suggesting traders are cautious about overcommitting to USD upside.
• Market Reaction Muted Equity and FX markets opened quietly this morning, reflecting the uncertain backdrop. Investors appear to be waiting for more clarity on trade policy and inflation dynamics.
• Key Data Ahead Focus now shifts to inflation readings from Germany and the US later today—specifically CPI and the Fed's preferred core PCE measure. These releases could be key in shaping near-term expectations around monetary policy.

🔍 What This Means:

Markets are caught in a tug-of-war between trade policy ambiguity and macroeconomic fundamentals. While the pause in the tariff ruling has removed an immediate catalyst, today's inflation figures could set the tone for currency moves going into the weekend. Watch for how the dollar reacts—any upside may continue to face resistance.

30th May 2025

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