Global markets were jolted today after the US Court of International Trade ruled against the Trump administration’s “Liberation Day” tariffs, stating the 1977 law used to justify them was misapplied. The decision also impacts earlier tariffs linked to US border security and fentanyl trafficking.
The dollar initially surged on the news but later turned mixed, particularly as dollar bloc and Scandinavian currencies gained ground. Meanwhile, emerging market currencies showed modest recovery, with notable strength in the South African rand, Mexican peso, and Chinese yuan.
Dollar Rally Falters Amid Broader Market Reactions
The US Dollar Index gapped higher following the court decision, peaking just under 100.50, but gradually retreated. A small price gap remains near 99.95, indicating potential technical support. The court ruling has overshadowed other US economic indicators, including Q1 GDP revisions and weak fuel demand data.
The Atlanta Fed’s GDPNow model projects 2.2% growth in Q2, while Wall Street economists expect just 1.3%. Meanwhile, early estimates for May’s nonfarm payrolls suggest a softening labor market, with just 130k jobs expected, down from April’s 177k.
Equities Welcome the Ruling; Bond Yields Rise
Equity markets responded positively to the trade court’s decision, with US index futures rallying—S&P 500 up 1.5% and Nasdaq gaining nearly 2%. The Stoxx 600 index recovered more than half of its previous losses and logged its third gain of the week. However, Taiwan and Indian equities underperformed.
Bond markets, on the other hand, faced pressure. US 10-year Treasury yields rose to 4.54%, and Japan’s long-end yields showed mixed moves—30-year yields jumped while 40-year yields fell sharply. In Europe, 10-year benchmark yields edged up by two basis points.
Commodity Markets Show Mixed Response
Gold prices, after slipping to $3245, are stabilizing near previous levels following Tuesday’s settlement at $3287. July WTI crude oil extended gains, briefly crossing $63 before retreating to $62.50—still $1 above last week’s closing price.
Markets Brace for Appeal
The Trump administration is expected to appeal the court’s decision, potentially reintroducing volatility across asset classes. While equities have so far embraced the ruling, currency and bond markets remain sensitive to policy uncertainty and macroeconomic data in the coming weeks.
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