Market sentiment turned notably more optimistic this week following a federal court ruling that blocked former President Donald Trump’s “Liberation Day” tariff measures. This judicial decision has alleviated some concerns about a potential recession in the United States, leading investors to adopt a more risk-on stance as they await key economic indicators scheduled for release later today. These include the second estimate of first-quarter GDP growth, weekly initial jobless claims, and April’s pending home sales figures.
The US dollar has demonstrated mixed performance against major currencies throughout the week, showing the strongest gains against the Japanese yen. Following the court ruling, the dollar rebounded sharply, pushing the dollar index to its highest level in over a week, surpassing the 100.50 mark. At the time of reporting, the index was up 0.25% for the day, standing at 100.12. Concurrently, US stock index futures rose between 1.3% and 2%, reflecting improved investor confidence.
On Wednesday evening, an international trade court ruled that Trump’s reciprocal tariff policy exceeded presidential authority, declaring the sweeping import tariffs on US trade partners unlawful. The three-judge panel criticized the use of tariffs as a bargaining tool, stating that such measures are prohibited under federal law regardless of their strategic merit. The Trump administration has filed an appeal, contesting the court’s jurisdiction over the matter.
Meanwhile, minutes from the Federal Reserve’s May meeting revealed growing uncertainty among policymakers about the economic outlook. Officials acknowledged the difficult balance they face, warning that persistent inflation alongside weakening economic growth and employment could require tough decisions on monetary policy.
Commodity markets reflected the shifting sentiment, with gold prices facing significant downward pressure during the Asian session. Gold dipped below $3,250 per ounce, reaching its lowest level since May 20 before rebounding slightly. At press time, gold was trading down 0.5%, near $3,270 per ounce.
Currency markets showed mixed moves. The euro continued its decline against the dollar, briefly falling to 1.1200 before recovering above 1.1250 in early European trade. The British pound also weakened during Asian trading hours, approaching 1.3400, but regained some ground in European markets to hover near 1.3450.
Japanese Finance Minister Shunichi Kato aligned with US Treasury Secretary Janet Yellen’s view that exchange rates should be determined by the market. Japan’s chief trade negotiator and Minister of Economy, Trade and Industry, Yoshimasa Akaza, expressed hopes for ministerial-level talks with Yellen and reiterated Japan’s request for the United States to reconsider its tariff policies. The USD/JPY currency pair extended its weekly gains, breaking above 145.50 with an approximate 0.5% rise on the day.
As important US economic data releases approach, market participants remain focused on risk sentiment and ongoing legal developments surrounding trade policy, both of which continue to influence currency dynamics and broader financial markets.
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